) debriefed the investors on its growth strategy for fiscal 2013,
while discussing the current business environment and providing a
recap of its performance in fiscal 2012.
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WALGREEN CO (WAG): Free Stock Analysis Report
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Fiscal 2012 Recap
Despite a challenging year, Walgreens attained several milestones
in fiscal 2012. The company made tuck-in acquisitions and forged
a strategic partnership with Alliance Boots. Further, Walgreens
launched its Balance Rewards loyalty program in September 2012,
which has recorded more than 50 million registrations to date.
The company generated record cash flow from operations of $4.4
billion in fiscal 2012 out of which $1.9 billion was returned
back to its shareholders via stock repurchases and dividends. The
payment of the largest quarterly dividend in the company's
history was another takeaway in the fiscal.
By adopting appropriate strategies, Walgreens was also able to
convert its fiscal 2012 headwinds into tailwinds for the ongoing
fiscal. Among these, the most important turnaround is the new
multi-year pharmacy network agreement with pharmacy benefit
) (from September 2012), under which the company's pharmacy
network has started filling prescriptions from Express Scripts
Growth Drivers for 2013 and Beyond
The company's three-pronged strategy of providing a holistic Well
Experience, improving the role of community pharmacy, and forging
strategic alliances is likely to yield positive results. Notably,
the company has left no stone unturned to bolster sales, ranging
from a customer loyalty program to stimulate consumer demand to
resorting to inorganic means.
In order to supplement its Well Experience approach, Walgreens
continues to enhance its products and services. Moreover, the
company is currently investing in private brands such as
Walgreens, Delish and Nice! among others.
Furthermore, Walgreens is the largest provider of vaccinations
and immunizations in the U.S., with respect to community
pharmacy. As per management, about 70% Americans are without a
primary care physician and over 30 million of the U.S. population
will gain insurance coverage in 2014 under the health care
reforms. Consequently, revenue contribution from this franchise
is expected to be more significant.
The strategic alliance with Alliance Boots has also allowed
Walgreens to expand its worldwide foothold, especially in Europe.
The company believes that the wholesale business of Alliance
Boots should improve its supply-chain performance. Also worth
mentioning in this context is Walgreens' increasing focus on
emerging markets as the pharmaceutical sector in these markets
present significant growth opportunities.
The recent developments regarding Walgreens continues to display
its strength in pursuing strategic initiatives as reflected in
the bullish momentum of its stock price. The stock inched towards
its 52-week high of $39.21 on January 11, 2013.
Following its annual shareholders' meeting, estimate revision
trends also reflect a bullish sentiment toward Walgreens over the
last 7 days. The positive revisions in the Zacks Consensus
Estimate for fiscal 2013 as well as fiscal 2014 underline these
While fiscal 2012 was a challenging year for Walgreens, we look
forward to fiscal 2013 with sublime optimism. We currently have a
long-term Neutral recommendation on the stock which carries a
Zacks Rank #3 (Hold). Its peers
Rite Aid Corporation
) carries a Zacks Rank #1 (Strong Buy) and
) carries a Zacks Rank #2 (Buy).