This summary is based on the third quarter fiscal 2008 earnings call conducted by Walgreen Company (WAG: chart) on June 23, 2008.

Management:

Divisional Vice President Investor Relations and Finance: Rick Hans
Chairman, Chief Executive Officer: Jeff Rein
Senior Vice President, Chief Financial Officer: Wade Miquelon
Senior Vice President, Chief Risk Officer: Bill Rudolphsen
President: Greg Wasson

Key Investors Issues

- EPS were 58 cents a share compared to 56 cents a share last year.
- Earnings rose to $572 million from $561 million a year earlier.
- Sales rose 9.6% to $15.01 billion.

Third Quarter Highlights

Net earnings rose 2% to $572 million or 58 cents per share, from $561 million or 56 cents per share in the same quarter a year ago.

Walgreens recorded a LIFO provision of $16.1 million in this year’s quarter versus a credit of $3.5 million in last year’s third quarter. Last year’s quarter also included a $13.5 million credit from the resolution of a multiyear state tax matter.

- Selling, general and administrative expense dollars grew 10% over the year-ago period. Expense control was strong across the company, including a decrease in the rate of store salary and expense growth as well as lower advertising expenses.
- As a percent to sales, SG&A expenses – at 22.1 – were essentially flat compared to the year-ago quarter.

- Sales increased 9.6% to $15 billion.
- Total sales in comparable stores were up 3.4%, while front-end comparable drugstore sales rose 4.6%.

For the most recently reported 52-week period, ending May 17, Walgreens increased its market share in 59 of its top 60 product categories compared to food, drug and mass merchandise competitors, as measured by A.C. Nielsen.

- Prescription sales, which accounted for 65.5% of sales, climbed 8.9%. Prescription sales in comparable stores rose 2.7%, while the number of prescriptions filled in comparable stores increased 1.1%. That compares to a 0.9% decrease in U.S. retail prescription volume (excluding Walgreens) during the same period, according to IMS Health and Walgreens figures.
-Prescription volume was negatively impacted in part by the switch of Zyrtec to over-the-counter status and by a milder flu season.

Gross profit dollars increased 9.3%, slower than the year-ago quarter’s 16% increase that was aided by blockbuster generic drug introductions.

- Gross profit margins decreased from 28.3 in last year’s quarter to 28.2 this year. Front-end margins decreased as the company expanded its promotional pricing activities, including digital photo promotions, to generate store traffic. That was partially offset by an increase in pharmacy margins due to the growth in generic drug sales.
- The company also recorded the previously mentioned LIFO provision in this year’s quarter versus a LIFO credit in the year-ago period.

- Investments in the long-term success of the company continued in the third quarter, with 138 new drugstore openings, 17 more than during last year’s quarter.
- Walgreens is on track to exceed its goal of opening 550 new drugstores this year, with a net increase of more than 500.

- Walgreens will expand its drugstore base by approximately 9% in fiscal 2008 and is on track to meet its goal of operating more than 7,000 drugstores by 2010. In May, Walgreens announced plans to open its first stores in Alaska in 2009, giving the company a presence in all 50 states.

The company announced the creation of its Walgreens Health and Wellness division, formed in part by the acquisitions of I-trax, Inc. and privately-held Whole Health Management, operators of worksite health centers.

- The division will allow large employers and health plans to provide care to employees and plan members at their worksites, and to dependents, retirees and the general public through the company’s 172 Take Care Health Clinics that operate at Walgreens drugstores.
- Walgreens announced that its subsidiary, OptionCare Enterprises, Inc., will acquire CuraScript Infusion Pharmacy, Inc., a wholly-owned subsidiary of Express Scripts, Inc. The transaction, expected to close within 30 days, will expand Walgreens national coverage in home infusion services through CuraScript’s 12 facilities in six states.

- To attract more patients to pharmacy services, the company is offering prescription savings club to the public. The club goes well beyond generic discount programs by offering savings on more than 5,000 brand name and generic medications.