CVS CAREMARK

WALGREENS

VS

Comparative Financial
Analysis

CVS Caremark Historical

Background
CVS stands for Consumer Value Store
1st CVS store founded in 1963 retailing health and beauty products in
Lowell, Massachusetts by Stanley and Sidney Goldstein as well as Ralph
Hoagland.

100 Stores operational by 1970, 1 Billion Sales level by 1985

Launch of Pharma Care, a Pharmacy Benefit Management Company in 1994

CVS becomes a Stand Alone company on NYSE in 1996

Changed fiscal year in 2008 for year end Dec 31 to reflect focus on
being a health provider and away from being considered a retailer.

CVS Caremark announces revenues exceeding $100 Billion in 2011

CVS Key Mergers and

Acquisitions (M&A)

1969 Part of Melville Corporation

1972 Purchased 84 store Clinton Drug and Discount Stores
1977 Acquired 36 store New Jersey Mack Drug
1990 Acquired 500 stores from Peoples Drug in mid-Atlantic states
1996 Divested as stand alone CVS on NYSE from Melville Corporation
1997 Acquired 2,500 stores from Revco, the largest retail pharmacy
acquisition in U.S. History.
1998 Acquires 200 stores from Arbor Drugs of Michigan
2004 Acquires 1,268 stores from Eckerd Stores and Health Services
2006 Acquires 700 stand alone Sav-On and Osco drugstores
2007 Merger with Caremark Rx, Inc. to become the largest integrated
provider of prescriptions and health-related services in the nation.
2013 Acquired Drogaria Onofre, Brazils 8 th largest drugstore chain in
first international activity.

Walgreens Historical
Background
Founded by Charles R. Walgreen Sr. in 1901 in Chicago, IL
Popular first store offering quick service, a more open layout, hot food, and milk shakes.
100th Store Opens in Chicago 1926
Walgreens stock goes public 1927
First broadcast advertising from drugstore chain on radio 1931
Innovation and Customer care led to 633 stores by 1975
$1 Billion in Sales reached in 1975
Opened 1,000th store in 1984
Began offering In-Store Health Clinics called Health Corner Clinics in 2006
Today Walgreens opens 435 stores each year with 7,000 planned to be open in 2010.
Walgreens is the 2nd largest user of satellite technology behind only the U.S. Government to
network prescription services.

Walgreens Key Mergers and

Acquisitions (M&A)

1946 Purchased the Mexican Retailer Sanborns

1982 Sold Sanborns
2007 Acquired Take Care Health Systems involving 400 clinics
2007 Acquired worksite Health Care provider I-trax/CHD
Meridian Healthcare and Whole Health Management
2007 Acquired 100 pharmacies from Option Care
2010 Acquired Duane Reade drugstore chain in New York
2011 Acquired online retailer Drugstore.com
2004 Acquires 1,268 stores from Eckerd Stores and Health
Services
2012 Acquired a 45% interest in European Pharmacy Alliance
Boots

CVS (Drug Store Industry) Rank

Yahoo Finance

WAG (Drug Store Industry) Rank

Yahoo Finance

Drug Store Industry Competition

Top 10 According to Yahoo Finance (Market Cap Basis)

Drug Store Model & Trends

Historically retail pharmacy revenues have come from pharmacy sales and less so from retail
and services.

More than 67% or two thirds of sales are originating from pharmacy retail.
The existence and sales of retail, health and beauty, clinical services, and other revenue are part
of the experience and convenience that produces customer loyalty for pharmacy sales.

There is increasing pressure on retail pharmacy locations from big box retailers such as Target
and Walmart which are growing in market share. Online pharmacies are growing more
prevalent. Other non retail Pharmacy Benefit Management Companies such as Express Scripps
and Prime Therapeutics create competition within the contract environment with buik user
representatives.

Growth opportunities are found in contractual agreements with drug suppliers and distributors
offering favorable generic products and volume reduced costs.

Baby boomer demand and careful management of Medicare Part D business.

Domestic / Foreign Business

These 2 companies have very limited or no foreign presence until

very recently.

Walgreens once owned the Mexican Retailer Sanborns after a 1946

but completely divested in a 1982 sale.

Walgreens had otherwise been domestic until the recent purchase of

45% interest in European pharmacy retailer Alliance Boots for $6.7
Billion in 2012. This purchase was cited as providing global scale and
presence.

CVS meanwhile on a much smaller scale acquired the eighth largest

pharmacy retailer Drogoria Onofre for $313 Million.

Liquidity & Turnover

Current Ratio

Current Ratio
1.5
1.45
1.4
1.35
1.3
1.25
1.2
1.15
1.1
Walgreens

CVS

Both Walgreens
(1.44)and CVS (1.23) are
liquid. In small
pharmacy a current ratio
of 2 is considered
necessary, but large
corporations such as
these do not typically
require that kind of
reserve nor do they
want to tie up cash or
other liquid reserves as
they do not anticipate a
dire need for them.

Liquidity & Turnover

Acid Test / Quick Ratio
Quick Ratio
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Walgreens

CVS

Walgreens exhibits a
quick ratio of .64 while
CVS has a quick ratio
of .43.Liquidity of
inventory comes into
play and may favor
Walgreens slightly
more conservative
approach to inventory
control. Both
companies are healthy
here however and with
long histories of
inventory control the
quick ratio is improved

Liquidity & Turnover

Inventory Turnover Ratio

Inventory Turnover Ratio

14
12
10
8
6
4
2
0
Walgreens

CVS

Industry

Inventory Ratio is a
measure of Liquidity in
terms of inventory. The
Cost of Goods Sold /
Inventories is an
indicator of how quickly
these companies turn
over there sales
inventories. Again both
companies are
performing well as WAG
is performing at 10.44
and CVS at10.18 times.

Operating Profitability
Return on Equity

ROE Ratio
14
12
10
8
6
4
2
0
Walgreens

CVS

Industry

Return on Equity
measuring operating
profitability in terms of net
income as a percentage of
total shareholder equity.
Walgreens is at 10.82%
while CVS is calculated at
11.66%. Both exhibit
strong profitability
margins. If we viewed a
history, wed see CVS
creeping ahead in this
category and then
moderating in comparison
after 2012.

Operating Profitability
P/E Ratio

P/E Ratio
18
16
14
12
10
8
6
4
2
0
Walgreens

CVS

Industry

Walgreens is
producing at a 16.76
while CVS is close
behind at 15.9. This
ratio is determined by
the Market Price per
share divided by the
Earning per share and
is an indicator of what
an investor will pay for
the stock based on
earnings reporting.

Operating Profitability
Earnings per Share EPS

EPS Ratio
3.5
3
2.5
2
1.5
1
0.5
0
Walgreens

CVS

Industry

The EPS Ratio is the net

income divided by the
number of share
outstanding. This ratio
determines how much
the company made on a
per share basis.
Walgreens EPS for 2012
reporting was 3.05 while
CVS was at 2.25 per
share.

References
Walgreens 10K

(n.d.). Retrieved from website:

http://investor.walgreens.com/secfiling.cfm?filingID=104207-12-98

CVS Caremark 10K

(n.d.). Retrieved from website:

http://phx.corporate-ir.net/phoenix.zhtml?c=99533&p=irol-sec&secCat01Enhanced.
45_rs=51&secCat01Enhanced.45_rc=10&control_searchbox=&control_year=0&control_s
electgroup=0#8636956

(n.d.). Retrieved from http://info.cvscaremark.com/our-company/history

(n.d.). Retrieved from http://www.walgreens.com/marketing/about/press/facts/fact3.jsp

(n.d.). Retrieved from http://finance.yahoo.com/q?s=cvs&ql=1

(n.d.). Retrieved from http://finance.yahoo.com/q?s=WAG&reco=1