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Executive Summary

Following six consecutive years of 20%-plus growth in Rx drug sales, Walgreens expects Rx volume to reach the $1 bil. level in 1987, the chain forecast in its just-released annual report for 1986. "With average store pharmacy sales of $699,000, Walgreens far outpaces competitive chains," the report states. Walgreens operated 1,273 drugstores in 30 states and Puerto Rico at the close of fiscal 1986, ended Aug. 31. New business areas that figure prominently into the chain's 1987 pharmacy business plans include third party health care plans, nursing homes and mail order Rx service, the annual report notes. Walgreens currently offers mail order Rx service through a facility in Phoenix, opened in fiscal 1986 and slated for a doubling in size "within the next few months." A second mail order pharmacy will open January in Orlando, Florida, according to the report. Pharmacy operations are enhanced through Intercom, a national chainwide on-line computer system. In addition to allowing Walgreen pharmacists to access patient profiles of any customer in the country, the network automatically alerts the pharmacist to generic availability on each Rx, printing the realized or potential savings on customer labels. The chain said it plans to continue its aggressive pace of 100 new store openings a year through 1990 "plus possible acquisitions." During fiscal 1986, Walgreens opened 102 new stores and purchased an additional 91 units through the acquisition of the Ribordy and Medi Mart chains. The 66-store Medi Mart acquisition, the largest in the company's history, estblished Walgreens' presence in the Northeast, primarily in Massachusetts, Connecticut and New Jersey ("The Pink Sheet" May 5, p. 6). "The untapped market potential in the East is impressive and we're aggressively seeking new store sites in those states," the report declares. The 25-store Ribordy chain acquisition in September 1985 "essentially doubled" the company's northern Indiana store base, Walgreens said. "In addition to the Northeast, drugstore expansion will continue next year in most major markets," the annual report states, "particularly the state of Florida, the San Francisco Bay area, and the cities of Minneapolis, Phoenix, Cincinnati and Chicago." Approximately 20%, or 232 of the chain's stores are located in the Chicago area, where the company is based. Walgreens is compelementing an aggressive store expansion program with an increased tempr of major remodelings (those exceeding $100,000 per store) in its business strategy for fiscal 1987. One hundred stores are targeted for major remodeling in 1987. "This vigorous schedule, which includes acquired units, pays off in sale as well as aesthetics," the chain explained. "Remodeled stores generate sales increases of 10-20% in one to three years following renovation." Almost 90 remodelings were completed during fiscal 1986. As a result of past efforts in these two areas, almost half, or 609, of all Walgreens stores are new in the last six years, the annual report notes. Roughly 75% have been opened and/or remodeled since 1980. The company said it plans "no radical changes" in the layout of stores, where the average selling space is 9,300 sq. ft. The size, which is considered optimum for a typical convenience-oriented shopping trip, "also offers an advantage in site availability over large mass retailers who require 20,000 or more sq. ft. of space," the report states.

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