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Walgreen execs tell shareholders future looks healthier

Walgreen is expanding its supply agreement with AmerisourceBergen through 10-year deal thgives nation’s largest drugstore chaan ownership stake pharmaceutical wholesaler.

Walgreen is expanding its supply agreement with AmerisourceBergen through a 10-year deal that gives the nation’s largest drugstore chain an ownership stake in the pharmaceutical wholesaler. | AP file

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Updated: February 12, 2013 2:25PM

Walgreens advertises itself as “at the corner of happy and healthy.” Some investors, though, have accused the company of being stuck in place.

At its annual shareholder meeting Wednesday in Chicago, Walgreen Co. executives answered that criticism by highlighting improvements in the company’s stock performance and initiatives that target near-term growth.

Among them was the drugstore giant’s settlement last year of a contract dispute with Express Scripts, the nation’s largest pharmacy benefits manager. Express Scripts works for employers and other health-care plan sponsors, and its members could not fill prescriptions at Walgreens from the end of 2011 until last September.

The dispute cost Deerfield-based Walgreen revenue and weighed on its stock price for more than a year. Some shareholders at the meeting questioned the handling of the fight, but former board Chairman Alan McNally commended executives for standing firm.

He said Express Scripts “demanded unacceptable rates and terms, which would undermine the value of Walgreens and the value of [a] community pharmacy on which millions of patients depend.”

Chief Executive Officer Greg Wasson had Express Scripts in mind when he listed several “headwinds” from 2012 that “are this year’s tailwinds.”

He said the company has launched its rewards program, aimed at bringing in repeat business while also encouraging Express Scripts customers to switch back to Walgreens, and more emphasis on private brands.

The private labels boost profit margins and go along with an initiative to expand fresh food to serve on-the-go customers and those in “food deserts” that lack full-service groceries.

Management has boosted shareholder returns, Wasson said. During 2012, Walgreen shares posted a 15.3 percent return, in line with the Standard & Poor’s 500 index, after mostly being a laggard during the last decade.

The company said its business combination with the European pharmacy giant Alliance Boots will drive overseas growth. In partnership, the companies should generate $130 billion in revenue in fiscal 2016, compared with Walgreen’s standalone total of $72 billion for fiscal 2012, which ended Nov. 30.

Walgeen estimates that operating cash flow will increase to $8 billion from $4.4 billion over the same period.

Wasson also said the company is stepping up efforts to combine its stores with e- and mobile commerce. “We are deliberately blurring retail channels to fit how consumers shop today,” he said.

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