Presented by:

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• Presented by
• Eva Cheung
• Hosein Taghaddos
• Jacek Olearczyk
• Juan Manrique
• October 25, 2006

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Walgreens (WAG)

• A retail pharmacy chain spanning 47 States and
  Puerto Rico
• A leader in innovative drugstore retailing (i.e.
  point-of-sale scanning, drive-thru pharmacies,
  1-hour photofinishing)
• Company strategies include
• To increase organic store growth
• To increase market share through innovation and
  execution
• To react quickly to changing customer needs
• To offer healthcare beyond traditional pharmacy
• To attract and retain top talent

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Timeline

• 1901 Charles R. Walgreen Sr. started the
  Walgreens chain
• 1916 9 stores incorporated as Walgreen Co.
• 1927 Walgreen Co. stock went public
• 1975 reached 1 billion in sales
• 2006 Currently operates 5,461 stores
• Marked the 32nd consecutive year of
• record sales and earnings
• 2010 Target of 7,000 stores

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Store Growth
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Recent Headlines

• Financial
• 2006 marked the 32nd consecutive year of record
  sales and earnings (Sep, 2006)
• Walgreens shares dropped 11 due to Walmarts
  announcement of low-price strategy (Sep, 2006)
• Community
• New distribution center designed to accommodate
  50 special needs workers (Sep, 2006)
• Alliance with Joslin Diabetes Center to develop
  and deliver awareness, wellness, prevention, and
  education programs nationally to Americans with
  diabetes or at risk for the disease. (Sep, 2006)

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Recent Headlines

• Growth
• Walgreen Co. completes merger with Happy Harrys
  Pharmacy Chain of 76 stores (Jul, 2006)
• Walgreens expands in the specialty pharmacy
  market
• Walgreens Home Care completes acquisition of Home
  Pharmacy of California (Dec, 2005)
• Walgreens acquires CM Pharmacy (Jul, 2006)
• Acquisition of Medmark Specialty Pharmacy
  Solution (Aug, 2006)

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Revenue, Contribution Margin, Net Income
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Inventory, Receivables,Accounts Payable
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Working Capital
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Total Assets Total Equity
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Cash Flow
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Dividends

• Steady dividend
• 32nd consecutive years of dividend payout

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Depreciation

• Growing company

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Competitors

• Rite-Aid Corporation
• 27 States and the District of Columbia
• Approx. 3323 retail stores
• 17.3 billion Total Sales, end of 2006 fiscal

• CVS Corporation
• Over 6200 retail stores
• 37 billion Total Sales, end of 2005 fiscal

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Inventory Turnover
Inventory Turnover sales / inventory
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Return on Total Assets
Return on Total Assets () operating income /
total assets
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Return on Equity
Return on Equity () net income / shareholders
equity
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Profit Margin on Sales
Profit Margin on Sales () operating income /
sales
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Enterprise Multiple
EM Enterprise Value/ EBITDA
WAG Walgreen Co. RAD Rite Aid Corp. CVS CVS
Corp.
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Stocks (CON)
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Stocks (CON)
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Direct Competitor Comparison
WAG Walgreen Co. RAD Rite Aid Corp. CVS CVS
Corp.
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Direct Competitor Comparison
WAG Walgreen Co. RAD Rite Aid Corp. CVS CVS
Corp.
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Financial Analysis

• CVS operates with lower short-term liabilities
• WAG restock inventory faster
• WAG receives money faster from its customers
• WAG produces a higher profit margin per year
• CVS share price projected to increase faster
  (26)
• WAG provides a higher rate of return for
  stakeholders (0.7)

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Company Analysis

• Risk level Low to Moderate
• Market
• Competition
• Financial and operations management
• Target investors Age 20 - 50
• Long term investment
• Growth and steady income

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