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08/11/2015

Walgreens Inventory, IT Cost, and Loyalty Program Improvements Help in 48% Sales Lift

Drugstore chain Walgreens Boots Alliance (WBA) saw net sales for the 2015 third quarter were $28.8 billion, an increase of 48.4% versus the comparable quarter in the prior year. During the quarter, the WBA invested $247 million in capital expenditure, making a total of $890 million for the first nine months of the year.

Investing to drive future growth is the company's first priority for capital deployment, both in terms of capital expenditure and selective M&A, according to WBA.

"Key areas for capital investment continue to be store investments as well as IT and digital capabilities, which are vital to building and maintaining a sustainable competitive advantage and are increasing omnichannel work," said George Fairweather, EVP, Global CFO and Principal Accounting Officer.

Fairweather explained this quarter disproportionally benefitted from the imposition of stricter capital investment controls to some degree. While WBA expects to maintain a rigid control on capital expenditure to assure appropriate returns on every dollar it spends, Fairweather said the company will not deprive the business of the investment it needs to thrive.

WBA remains focused on generating cash through working capital efficiencies, particularly in Retail Pharmacy USA. A primary area of focus for the company is inventory management, both in pharmacy and retail products. For the quarter, WBA improved its inventory days of supply in the U.S. by approximately six days versus the prior year quarter, according to Fairweather.

WBA also reduced the IT cost structure in the USA to help enable significant store system investments over the coming years. 

WBA also continues to enhance its Balance Rewards program and recently released Balanced Rewards with everyday points. WBA now provides its active customers with a more consistent platform to receive loyalty points on most pharmacy and retail product transactions. The company also encourages healthy life style choices by awarding points for positive health and well-being decisions.

Pessina Appointed Permanent CEO
Stefano Pessina, who ran European drugstore chain Alliance Boots before its merger last year with Walgreens, was appointed by the Board as CEO, replacing the Interim appointment that Pessina was previously fulfilling.
 
"The Board has decided that bearing in mind the pace of change and the amount that we have still to do, there is a benefit to stability at the senior level in the organization and to focus on the operational and strategic task before us, rather than appointing, orientating, and educating someone new to the business during the period," said Pessina, Executive Vice Chairman and CEO of Walgreens Boots Alliance.