Walgreen's prescription for world domination of the drugstore industry relies on acquisitions at home and abroad. The nation's #1 drugstore chain operates more than 8,300 mostly freestanding Walgreens stores in all 50 US states, the District of Columbia, and Puerto Rico. Prescription drugs account for about two-thirds of sales; the rest comes from general merchandise, over-the-counter medications, cosmetics, and groceries. Most Walgreens stores offer drive-through pharmacies and one-hour photo processing. In a strategic shift, Walgreen has become increasingly acquisitive. Having blanketed the US with its drugstores, ubiquitous Walgreen is now looking to Europe and fill-in acquisitions at home for growth.
Walgreens operates 8,300 locations across the US.
Walgreen's drugstores specialize in the retail sale of prescription and non-prescription drugs and general merchandise. General merchandise includes convenience and fresh foods, household items, personal care, beauty care, photofinishing and candy. In 2014 prescription drugs represented 64% of total sales, general merchandise represented 26% of total sales, and non-prescription drugs represented 10% of total sales.
Fiscal 2014 (ends August) was a milestone year for Walgreen, which posted record-setting revenues of nearly $76.4 billion. Its profits, however, slipped 21% from $2.5 billion in 2013 to $1.9 billion in 2014 due to higher income tax provisions and other expenses. In addition, Walgreen's operating cash flow slowly declined from 2012 to 2014.
The historic growth for 2014 was due to new store sales and an increase in comparable drugstore sales over the prior year. Sales were also positively impacted by Walgreen's decision to rejoin the Express Scripts pharmacy provider network and its acquisition of USA Drug and BioScrip, both of which were partially offset by lower comparable store sales.
In order to continue its growth trajectory, Walgreen has been working to cut costs, form partnerships, and utilize acquisitions. In 2014 Walgreen sold a majority stake in its Take Care Employer Solutions (TCES) subsidiary, which manages more than 360 worksite health centers, to a healthcare-focused investment group Water Street Healthcare Partners.
In 2013 Walgreens and Alliance Boots formed a partnership with pharmaceutical wholesaler AmerisourceBergen to buy branded and generic prescription drugs from the supplier for the next 10 years. Walgreen and Alliance Boots also gained rights to purchase a minority stake in AmerisourceBergen and the three partners will collaborate on supply chain opportunities.
Mergers and Acquisitions
Looking to strengthen its presence in the fast-growing North Carolina market, Walgreen in late 2013 acquired regional chain drug operator Kerr Drug. The transaction, which included Kerr Drug's 76 retail drugstores, its specialty pharmacy business, and a distribution center, excluded Kerr Drug's long-term care pharmacy business.
In its biggest acquisition ever, the pharmacy chain in 2012 bought a 45% stake in Swiss-based drugstore-chain company Alliance Boots for $6.7 billion. Alliance Boots has more than 3,330 health and beauty retail stores in 11 countries; its pharmaceutical wholesale businesses cater to pharmacies, doctors, and hospitals from some 370 distribution centers in 21 countries. In 2014 Walgreen announced it was buying the remaining 55% stake in Alliance Boots for $15.3 billion. The massive deal will significantly enhance Walgreen's global presence, giving it a footprint in 10 countries with over 11,000 locations.
Closer to home, Walgreen in September 2012 acquired $825-million-in-sales Stephen L. LaFrance Holdings, a regional drugstore operator with 144 stores under the USA Drug, Super D Drug, May's Drug, and Drug Warehouse banners, among others, in the about a half a dozen states mostly in the mid-south. Earlier in the year the company bought BioScrip's community specialty pharmacies and centralized specialty and mail service pharmacy businesses. The approximately $225 million deal was in line with Walgreen's objectives to consolidate and grow its health care and retail services.