Walgreen Co. (NYSE: WAG), d/b/a Walgreens (without an apostrophe), is the largest drugstore chain in the United States of America. As of March 31st, the company operates 8,169 drugstores across all 50 states, the District of Columbia and Puerto Rico. Founded in Chicago, Illinois in 1901, and has since expanded throughout the United States, Walgreens is currently headquartered in the nearby suburb of Deerfield, Illinois.
Walgreen Co. is the largest drugstore chain in the United States in terms of sales, more than 60 percent of which derives from retail prescriptions. During 2003 Walgreen filled 400 million prescriptions, representing about 13 percent of all retail prescriptions in the country. It operates more than 4,400 Walgreens drugstores in 44 states and Puerto Rico. About 80 percent of these outlets are freestanding locations, more than three-quarters have drive-through pharmacies, and nearly all of them offer one-hour photofinishing. In addition to the flagship Walgreens, the company also runs Walgreens Health Initiatives, a prescription benefit manager serving small and medium-sized employers and managed care organizations. Walgreen's century-plus history has been marked in more recent years by explosive growth fueled almost entirely by the opening of new stores--a sharp contrast with the firm's main rivals, CVS Corporation and Rite Aid Corporation, both of which have led a wave of industry consolidation through acquisition. By 2004, more than half of Walgreens outlets were less than five years old.
Walgreen Co. (Walgreen), incorporated in 1909, together with its subsidiaries, operates a drugstore chain in the United States. The Company provides its customers with multichannel access to consumer goods and services, and pharmacy, health and wellness services in communities across America. Walgreen offers its products and services through drugstores, as well as through mail, by telephone, and via the Internet. The Company sells prescription and non-prescription drugs, as well as general merchandise, including household products, convenience foods, personal care, beauty care, candy, photofinishing and seasonal items. Its pharmacy services includes retail, specialty, infusion, medical facility, long- term care and mail service, along with pharmacy benefit solutions and respiratory services. In January 2010, the Company announced that it has completed the acquisition of the assets of 12 Eaton Apothecary pharmacies in the Boston area from D.A.W., Inc., a subsidiary of Nyer Medical Group, Inc.
Walgreen’s Take Care Health Systems subsidiary is a manager of worksite health centers and in-store convenient care clinics, with more than 700 locations throughout the United States. As of August 31, 2010, Walgreens operated 8,046 locations in 50 states, the District of Columbia, Puerto Rico and Guam. During the fiscal year ended August 31, 2010, the Company opened or acquired 670 locations for a net increase of 550 locations after relocations and closings. Total locations do not include 352 convenient care clinics operated by Take Care Health Systems, Inc. within its drugstores.
The Company owns approximately 20% of the retail drugstores open at August 31, 2010. The Company's retail store operations are supported by 16 major distribution centers with a total of approximately 14 million square feet of space in all distribution centers, of which nine million square feet is owned. It operates 25 principal office facilities containing approximately three million square feet of which approximately two million square feet is owned and the remainder is leased. The Company operates two mail service facilities containing approximately 237 thousand square feet of which approximately 133 thousand square feet is owned and the remainder is leased. The Company also owns 37 strip shopping malls containing approximately two million square feet of which approximately 776 thousand square feet is leased to others.
In the late 1990s and into the early years of the 21st century, Walgreen achieved a remarkable record of steady growth and profitability. As revenues more than doubled from $15.31 billion in 1998 to $32.51 billion in 2003, profits increased at a similar pace, jumping from $511 million to $1.18 billion. Throughout this entire period, the net profit margin stayed within a narrow band, between 3.3 percent and 3.7 percent. Moreover, the results for 2003 marked the company's 29th consecutive year of record sales and earnings. Walgreen added about 350 stores per year in this period, opening its 3,000th store in Chicago in March 2000 and its 4,000th store in Van Nuys, California, in March 2003.
This growth was achieved almost entirely organically as Walgreen eschewed the acquisition route to growth of its competitors, who were participating in a huge consolidation wave that was sweeping the drugstore industry. Walgreen preferred to carefully select its own sites for new stores rather than taking on the hodgepodge of stores with some undesirable locations and/or store formats that the typical large acquisition involves. This strategy also supported a more rapid transition of the store base to Walgreen's preferred format--freestanding stores with drive-through pharmacies, usually located on high-traffic corners. By the end of 2003, of the 4,227 company drugstores, 3,363 were freestanding units and 3,280 had drive-through pharmacies; more than half of the stores were less than five years old. To provide further convenience for customers, 1,112 Walgreens outlets were open 24 hours a day (creating combination convenience/drugstores), and nearly all of them offered one-hour photofinishing services.
There were a number of other important developments during this period. In 1999 Walgreen launched a comprehensive online pharmacy that enabled customers to order prescriptions for in-store pickup or mail delivery and also offered access to the health and wellness content of Mayo Clinic Health Information. The following year the web site was expanded to include front-of-the-store merchandise, such as nail polish and shampoo. After the company celebrated its 100th anniversary in 2001, another change in leadership occurred. In January 2002 David Bernauer, a former pharmacist and lifelong Walgreen employee who most recently served as president and chief operating officer, was named CEO, succeeding Jorndt. Bernauer inherited Jorndt's position of chairman as well one year later. In support of its rapid expansion, Walgreen opened major new distribution centers in Jupiter, Florida, and Dallas (both in 2002); in Perrysburg, Ohio (2003); and in Moreno Valley, California (2004)--bringing the total number of such facilities to 11. Late in 2003 Walgreen ended 17 years on the acquisition sideline when it purchased 11 stores and the pharmacy files of five others from Hi-School Pharmacy. The stores were located in the Portland, Oregon, and Vancouver, Washington, metropolitan areas.
Although Walgreen's competition seemed to grow increasingly fierce both at the retail level and in the form of the nascent mail-order pharmacy industry, no clear evidence had arisen suggesting that the company's steady growth was likely to come to an end. The aging U.S. population, coupled with the introduction of innovative new drugs, was fueling prescription growth, and the portion of revenues that Walgreen derived from prescriptions continued to increase, surging from less than 50 percent in 1996 to 62 percent by 2003. The company was seeking to add a net 365 stores during 2004--supported by capital expenditures of $1 billion--toward a longer term goal of 7,000 stores by 2010. Among the markets targeted for major expansion was New York City, where Walgreen had only a small presence.
Principal Subsidiaries: Walgreen Arizona Drug Co.; Bond Drug Company of Illinois; Walgreens Home Care, Inc.; Walgreens Healthcare Plus, Inc.; Walgreens.com, Inc.; WHP Health Initiatives, Inc.; Walgreen Louisiana Co., Inc.; Walgreen Hastings Co.; Walgreen Eastern Co., Inc.; Walgreen of Puerto Rico, Inc.; Walgreen of San Patricio, Inc.
Principal Competitors: CVS Corporation; Rite Aid Corporation; Wal-Mart Stores, Inc.; The Jean Coutu Group (PJC) Inc.
The company began the 1980s by refocusing on drugstores and eliminating certain businesses. In 1980 it ended the agency program, begun in 1929, which accounted for only 2 percent of sales. This step did not sit well with some former agency stores; a group of store operators in Wisconsin sued Walgreen Co., eventually winning a $431,000 judgment. The following year, Walgreen closed its 27 optical centers and ended the partnership with Schnuck's. The company also eliminated many in-store restaurants, concentrating on Wag's instead; in-store restaurants decreased in number from 231 in 1979 to 119 in 1984.
Expanding the drugstore business, Walgreen Co. brought the Rennehbohm chain, based in Madison, Wisconsin, in 1980. Rennehbohm had 17 drugstores, two clinic pharmacies, two health- and beauty-aid stores, a card shop, and six cafeterias. In 1981 Walgreen bought 21 Kroger SuperX drugstores in Houston. In 1982 the company added additional services to its drugstores: it made next-day photofinishing available chainwide and put grocery departments in some stores located in urban areas.
In 1983 Walgreen completed chainwide installation of its Intercom computerized pharmacy system. By the end of the decade Intercom connected each store in the chain via satellite to a mainframe computer in Des Plaines, Illinois. This system enabled customers to have their prescriptions filled at any Walgreens in the country.
Walgreen opened its 1,000th store, on the near north side of Chicago, in 1984. The company continued expanding in the drugstore area, while divesting itself of other businesses; also in 1984 it sold its interest in Sanborns, by then 46.9 percent, to Sanborns's other principals for about $30 million, a move spurred by Mexico's high inflation rate.
In 1986 Walgreen bought the 66 Medi Mart stores, located primarily in New England, in the company's largest single acquisition ever. That year, the company also bought 25 stores from the Indiana chain, Ribordy, and opened 102 new stores, making 1986 Walgreen's biggest year for expansion yet.
In 1988, continuing to trim non-drugstore businesses, Walgreen sold its 87 freestanding Wag's restaurants to Marriott Corporation. In 1988 the Haft family sought regulatory clearance to acquire a block of Walgreen stock--a move that company officials feared would lead to an unfriendly takeover bid, as the Hafts had tried to acquire other retailers. Walgreen responded with a move that was seen as an antitakeover device--the establishment of "golden parachutes," payments to be made to executives if they left the firm after a takeover. No bid came through, however.
In 1989 the company opened four mini-drugstores called Walgreens RxPress, which offered a full-service pharmacy and popular non-prescription items in areas where full-sized store locations were difficult to find. By the mid-1990s, these 2,000-square-foot units, some of which offered one-hour photofinishing services, also featured convenient drive-through pharmacies. There were 25 RxPress locations by 1996.
OVERALL
Beta: 0.98
Market Cap (Mil.): $41,168.21
Shares Outstanding (Mil.): 915.46
Annual Dividend: 0.70
Yield (%): 1.56
FINANCIALS
WAG Industry Sector
P/E (TTM): 18.93 5.68 38.04
EPS (TTM): 11.39 -- --
ROI: 11.74 3.91 8.61
ROE: 15.20 5.07 13.81
Statistics:
Public Company
Incorporated: 1916
Employees: 154,000
Sales: $32.51 billion (2003)
Stock Exchanges: New York Chicago
Ticker Symbol: WAG
NAIC: 446110 Pharmacies and Drug Stores
Key Dates:
1901: Charles R. Walgreen buys the drugstore on the south side of Chicago where he had been working as a pharmacist.
1909: Walgreen opens his second store, which features a soda fountain.
1916: Now operating nine drugstores, the founder incorporates his business as Walgreen Co.
1925: Walgreen has more than 65 stores in Chicago, Milwaukee, St. Louis, and Minneapolis-St. Paul.
1927: Company goes public.
1952: Walgreen begins transition to self-service with the opening of its first self-service drugstore.
1975: Sales surpass the $1 billion mark.
1984: The 1,000th Walgreens store is opened.
1986: Company completes its largest-ever acquisition, the 66-unit Medi Mart chain.
1992: First freestanding Walgreens store opens; drive-through pharmacies make their debut.
2003: The 4,000th Walgreens store opens.
Name Age Since Current Position
Alan McNally 65 2009 Independent Chairman of the Board
Gregory Wasson 52 2009 President, Chief Executive Officer, Director
Wade Miquelon 45 2009 Chief Financial Officer, Executive Vice President
Mark Wagner 49 2010 President - Community Management
Kermit Crawford 51 2010 President - Pharmacy Services
Sona Chawla 43 2011 President - E-Commerce
Joseph Magnacca 47 2011 President - Daily Living Products and Solutions
Dana Green 60 2010 Executive Vice President, General Counsel, Corporate Secretary
Timothy Theriault 50 2009 Senior Vice President, Chief Information Officer
Mia Scholz 44 2011 Senior Vice President - Accounting, Controller
Robert Zimmerman 57 2011 Senior Vice President and Chief Strategy Officer
Kathleen Wilson-Thompson 53 2010 Senior Vice President, Chief Human Resources Officer
Jeffrey Berkowitz 2010 Senior Vice President - Pharmaceutical Development and Market Access
Graham Atkinson 58 2011 Senior Vice President and Chief Customer Experience Officer
Kimberly Feil 51 2008 Vice President, Chief Marketing Officer
W. Bryan Pugh 47 2009 Vice President - Merchandising
William Foote 60 1997 Independent Director
David Schwartz 70 2000 Independent Director
James Skinner 66 2005 Independent Director
Nancy Schlichting 56 2006 Independent Director
Alejandro Silva 63 2008 Independent Director
Steven Davis 52 2009 Independent Director
Mark Frissora 55 2009 Independent Director
Ginger Graham 54 2010 Independent Director
David Brailer 51 2010 Independent Director
Address:
200 Wilmot Road
Deerfield, Illinois 60015-4620
U.S.A.
Walgreen Co. is the largest drugstore chain in the United States in terms of sales, more than 60 percent of which derives from retail prescriptions. During 2003 Walgreen filled 400 million prescriptions, representing about 13 percent of all retail prescriptions in the country. It operates more than 4,400 Walgreens drugstores in 44 states and Puerto Rico. About 80 percent of these outlets are freestanding locations, more than three-quarters have drive-through pharmacies, and nearly all of them offer one-hour photofinishing. In addition to the flagship Walgreens, the company also runs Walgreens Health Initiatives, a prescription benefit manager serving small and medium-sized employers and managed care organizations. Walgreen's century-plus history has been marked in more recent years by explosive growth fueled almost entirely by the opening of new stores--a sharp contrast with the firm's main rivals, CVS Corporation and Rite Aid Corporation, both of which have led a wave of industry consolidation through acquisition. By 2004, more than half of Walgreens outlets were less than five years old.
Walgreen Co. (Walgreen), incorporated in 1909, together with its subsidiaries, operates a drugstore chain in the United States. The Company provides its customers with multichannel access to consumer goods and services, and pharmacy, health and wellness services in communities across America. Walgreen offers its products and services through drugstores, as well as through mail, by telephone, and via the Internet. The Company sells prescription and non-prescription drugs, as well as general merchandise, including household products, convenience foods, personal care, beauty care, candy, photofinishing and seasonal items. Its pharmacy services includes retail, specialty, infusion, medical facility, long- term care and mail service, along with pharmacy benefit solutions and respiratory services. In January 2010, the Company announced that it has completed the acquisition of the assets of 12 Eaton Apothecary pharmacies in the Boston area from D.A.W., Inc., a subsidiary of Nyer Medical Group, Inc.
Walgreen’s Take Care Health Systems subsidiary is a manager of worksite health centers and in-store convenient care clinics, with more than 700 locations throughout the United States. As of August 31, 2010, Walgreens operated 8,046 locations in 50 states, the District of Columbia, Puerto Rico and Guam. During the fiscal year ended August 31, 2010, the Company opened or acquired 670 locations for a net increase of 550 locations after relocations and closings. Total locations do not include 352 convenient care clinics operated by Take Care Health Systems, Inc. within its drugstores.
The Company owns approximately 20% of the retail drugstores open at August 31, 2010. The Company's retail store operations are supported by 16 major distribution centers with a total of approximately 14 million square feet of space in all distribution centers, of which nine million square feet is owned. It operates 25 principal office facilities containing approximately three million square feet of which approximately two million square feet is owned and the remainder is leased. The Company operates two mail service facilities containing approximately 237 thousand square feet of which approximately 133 thousand square feet is owned and the remainder is leased. The Company also owns 37 strip shopping malls containing approximately two million square feet of which approximately 776 thousand square feet is leased to others.
In the late 1990s and into the early years of the 21st century, Walgreen achieved a remarkable record of steady growth and profitability. As revenues more than doubled from $15.31 billion in 1998 to $32.51 billion in 2003, profits increased at a similar pace, jumping from $511 million to $1.18 billion. Throughout this entire period, the net profit margin stayed within a narrow band, between 3.3 percent and 3.7 percent. Moreover, the results for 2003 marked the company's 29th consecutive year of record sales and earnings. Walgreen added about 350 stores per year in this period, opening its 3,000th store in Chicago in March 2000 and its 4,000th store in Van Nuys, California, in March 2003.
This growth was achieved almost entirely organically as Walgreen eschewed the acquisition route to growth of its competitors, who were participating in a huge consolidation wave that was sweeping the drugstore industry. Walgreen preferred to carefully select its own sites for new stores rather than taking on the hodgepodge of stores with some undesirable locations and/or store formats that the typical large acquisition involves. This strategy also supported a more rapid transition of the store base to Walgreen's preferred format--freestanding stores with drive-through pharmacies, usually located on high-traffic corners. By the end of 2003, of the 4,227 company drugstores, 3,363 were freestanding units and 3,280 had drive-through pharmacies; more than half of the stores were less than five years old. To provide further convenience for customers, 1,112 Walgreens outlets were open 24 hours a day (creating combination convenience/drugstores), and nearly all of them offered one-hour photofinishing services.
There were a number of other important developments during this period. In 1999 Walgreen launched a comprehensive online pharmacy that enabled customers to order prescriptions for in-store pickup or mail delivery and also offered access to the health and wellness content of Mayo Clinic Health Information. The following year the web site was expanded to include front-of-the-store merchandise, such as nail polish and shampoo. After the company celebrated its 100th anniversary in 2001, another change in leadership occurred. In January 2002 David Bernauer, a former pharmacist and lifelong Walgreen employee who most recently served as president and chief operating officer, was named CEO, succeeding Jorndt. Bernauer inherited Jorndt's position of chairman as well one year later. In support of its rapid expansion, Walgreen opened major new distribution centers in Jupiter, Florida, and Dallas (both in 2002); in Perrysburg, Ohio (2003); and in Moreno Valley, California (2004)--bringing the total number of such facilities to 11. Late in 2003 Walgreen ended 17 years on the acquisition sideline when it purchased 11 stores and the pharmacy files of five others from Hi-School Pharmacy. The stores were located in the Portland, Oregon, and Vancouver, Washington, metropolitan areas.
Although Walgreen's competition seemed to grow increasingly fierce both at the retail level and in the form of the nascent mail-order pharmacy industry, no clear evidence had arisen suggesting that the company's steady growth was likely to come to an end. The aging U.S. population, coupled with the introduction of innovative new drugs, was fueling prescription growth, and the portion of revenues that Walgreen derived from prescriptions continued to increase, surging from less than 50 percent in 1996 to 62 percent by 2003. The company was seeking to add a net 365 stores during 2004--supported by capital expenditures of $1 billion--toward a longer term goal of 7,000 stores by 2010. Among the markets targeted for major expansion was New York City, where Walgreen had only a small presence.
Principal Subsidiaries: Walgreen Arizona Drug Co.; Bond Drug Company of Illinois; Walgreens Home Care, Inc.; Walgreens Healthcare Plus, Inc.; Walgreens.com, Inc.; WHP Health Initiatives, Inc.; Walgreen Louisiana Co., Inc.; Walgreen Hastings Co.; Walgreen Eastern Co., Inc.; Walgreen of Puerto Rico, Inc.; Walgreen of San Patricio, Inc.
Principal Competitors: CVS Corporation; Rite Aid Corporation; Wal-Mart Stores, Inc.; The Jean Coutu Group (PJC) Inc.
The company began the 1980s by refocusing on drugstores and eliminating certain businesses. In 1980 it ended the agency program, begun in 1929, which accounted for only 2 percent of sales. This step did not sit well with some former agency stores; a group of store operators in Wisconsin sued Walgreen Co., eventually winning a $431,000 judgment. The following year, Walgreen closed its 27 optical centers and ended the partnership with Schnuck's. The company also eliminated many in-store restaurants, concentrating on Wag's instead; in-store restaurants decreased in number from 231 in 1979 to 119 in 1984.
Expanding the drugstore business, Walgreen Co. brought the Rennehbohm chain, based in Madison, Wisconsin, in 1980. Rennehbohm had 17 drugstores, two clinic pharmacies, two health- and beauty-aid stores, a card shop, and six cafeterias. In 1981 Walgreen bought 21 Kroger SuperX drugstores in Houston. In 1982 the company added additional services to its drugstores: it made next-day photofinishing available chainwide and put grocery departments in some stores located in urban areas.
In 1983 Walgreen completed chainwide installation of its Intercom computerized pharmacy system. By the end of the decade Intercom connected each store in the chain via satellite to a mainframe computer in Des Plaines, Illinois. This system enabled customers to have their prescriptions filled at any Walgreens in the country.
Walgreen opened its 1,000th store, on the near north side of Chicago, in 1984. The company continued expanding in the drugstore area, while divesting itself of other businesses; also in 1984 it sold its interest in Sanborns, by then 46.9 percent, to Sanborns's other principals for about $30 million, a move spurred by Mexico's high inflation rate.
In 1986 Walgreen bought the 66 Medi Mart stores, located primarily in New England, in the company's largest single acquisition ever. That year, the company also bought 25 stores from the Indiana chain, Ribordy, and opened 102 new stores, making 1986 Walgreen's biggest year for expansion yet.
In 1988, continuing to trim non-drugstore businesses, Walgreen sold its 87 freestanding Wag's restaurants to Marriott Corporation. In 1988 the Haft family sought regulatory clearance to acquire a block of Walgreen stock--a move that company officials feared would lead to an unfriendly takeover bid, as the Hafts had tried to acquire other retailers. Walgreen responded with a move that was seen as an antitakeover device--the establishment of "golden parachutes," payments to be made to executives if they left the firm after a takeover. No bid came through, however.
In 1989 the company opened four mini-drugstores called Walgreens RxPress, which offered a full-service pharmacy and popular non-prescription items in areas where full-sized store locations were difficult to find. By the mid-1990s, these 2,000-square-foot units, some of which offered one-hour photofinishing services, also featured convenient drive-through pharmacies. There were 25 RxPress locations by 1996.
OVERALL
Beta: 0.98
Market Cap (Mil.): $41,168.21
Shares Outstanding (Mil.): 915.46
Annual Dividend: 0.70
Yield (%): 1.56
FINANCIALS
WAG Industry Sector
P/E (TTM): 18.93 5.68 38.04
EPS (TTM): 11.39 -- --
ROI: 11.74 3.91 8.61
ROE: 15.20 5.07 13.81
Statistics:
Public Company
Incorporated: 1916
Employees: 154,000
Sales: $32.51 billion (2003)
Stock Exchanges: New York Chicago
Ticker Symbol: WAG
NAIC: 446110 Pharmacies and Drug Stores
Key Dates:
1901: Charles R. Walgreen buys the drugstore on the south side of Chicago where he had been working as a pharmacist.
1909: Walgreen opens his second store, which features a soda fountain.
1916: Now operating nine drugstores, the founder incorporates his business as Walgreen Co.
1925: Walgreen has more than 65 stores in Chicago, Milwaukee, St. Louis, and Minneapolis-St. Paul.
1927: Company goes public.
1952: Walgreen begins transition to self-service with the opening of its first self-service drugstore.
1975: Sales surpass the $1 billion mark.
1984: The 1,000th Walgreens store is opened.
1986: Company completes its largest-ever acquisition, the 66-unit Medi Mart chain.
1992: First freestanding Walgreens store opens; drive-through pharmacies make their debut.
2003: The 4,000th Walgreens store opens.
Name Age Since Current Position
Alan McNally 65 2009 Independent Chairman of the Board
Gregory Wasson 52 2009 President, Chief Executive Officer, Director
Wade Miquelon 45 2009 Chief Financial Officer, Executive Vice President
Mark Wagner 49 2010 President - Community Management
Kermit Crawford 51 2010 President - Pharmacy Services
Sona Chawla 43 2011 President - E-Commerce
Joseph Magnacca 47 2011 President - Daily Living Products and Solutions
Dana Green 60 2010 Executive Vice President, General Counsel, Corporate Secretary
Timothy Theriault 50 2009 Senior Vice President, Chief Information Officer
Mia Scholz 44 2011 Senior Vice President - Accounting, Controller
Robert Zimmerman 57 2011 Senior Vice President and Chief Strategy Officer
Kathleen Wilson-Thompson 53 2010 Senior Vice President, Chief Human Resources Officer
Jeffrey Berkowitz 2010 Senior Vice President - Pharmaceutical Development and Market Access
Graham Atkinson 58 2011 Senior Vice President and Chief Customer Experience Officer
Kimberly Feil 51 2008 Vice President, Chief Marketing Officer
W. Bryan Pugh 47 2009 Vice President - Merchandising
William Foote 60 1997 Independent Director
David Schwartz 70 2000 Independent Director
James Skinner 66 2005 Independent Director
Nancy Schlichting 56 2006 Independent Director
Alejandro Silva 63 2008 Independent Director
Steven Davis 52 2009 Independent Director
Mark Frissora 55 2009 Independent Director
Ginger Graham 54 2010 Independent Director
David Brailer 51 2010 Independent Director
Address:
200 Wilmot Road
Deerfield, Illinois 60015-4620
U.S.A.