Financial Ratio Analysis: Walgreen Company

Read Complete Research Material

Financial Ratio Analysis: Walgreen Company


Walgreens, the largest drug store chain, supplies to its customers the superior access to consumer goods and services, health, and pharmacy services all across the United States. It provides its customers with the services and products through mail, internet, telephone and drugstores. The company both non-prescription and prescription drugs alongside the general merchandise, which includes convenience food products, personal and beauty care, photofinishing and seasonal products etc… The acquisition of Duane Reade in 2010 added 257 stores in the New York City metropolitan area to bring Walgreen's total location count to 8,046. The transaction is a deviation from the company's traditional reliance on organic growth to drive its expansion as opposed to acquisitions. It also points to the opportunities in expanding front-end sales within the chain drug store industry, which has historically been the focus of Duane Reade stores, where product categories are around 54.0% front-end versus the typical Walgreen mix of 33.0% front-end.

The company's main product is pharmaceuticals, with 65.0% of sales from prescription drugs and 10.0% from over-the-counter medications. Generic prescriptions account for about two-thirds of sales and are poised to increase as a share of the total during the five years to 2016. The remainder of Walgreen's sales comes from cosmetics, toiletries, food, beverages and tobacco products. Front-end sales have been challenged due to price competition in food and consumables, improved discretionary offerings at the dollar stores and the difficult macro-environment.

Unlike its top competitor, CVS Caremark, Walgreens does not operate a pharmacy benefit management business. Pharmacy benefit managers, or PBMs, administer drug benefits for employers and health plans. In March 2011, Catalyst Health Solutions Inc. acquired Walgreen's pharmacy benefit management business, Walgreens Health Initiatives Inc. This move was indicative of Walgreen's intentions to focus more on its pharmacy services. It has continued growing its specialty pharmacy and mail service businesses, which are extensions of its drugstores, retail clinics, work site health centers and medical facility pharmacies.

In mid June 2010, Walgreen entered into a multiyear agreement with CVS Caremark that includes Walgreen as an in-network pharmacy, settling a two-week long public debate on the ongoing nature of their relationship. The dispute raised awareness on the significance of CVS' large in-house PBM operations and highlights the threat that Walgreen faces by not operating its own PBM.

Financial Ratios Analysis of Walgreen Company

Financial analysis serves as the lifeblood for any organization. The financial ratios indicate the overall feasibility and performance of the firm. Different ratios have different interpretations

The financial statement analysis is the critical process aimed at assessing the financial position, past and present, and results of operations of a company, with the primary objective of establishing the best possible estimates and predictions about the condition and future results. The financial statement analysis rests on two main pillars of knowledge: the deep knowledge of the accounting model and the domain of financial analysis tools that identify and analyze the relationships and financial and operational factors. The most important quantitative data used by analysts ...
Related Ads