Walgreen Company WAG
Q4 2010 Earnings Call Transcript

Operator: Mark Miller, William Blair.

Mark Miller - William Blair: My one question is going to be on gross margins. Can you describe the change from last period? I know new generics moved up through the quarter, but it's hard to see that that would have explained fully the change in trend, and so without any guidance going forward, it's very tough to get the quarter’s ride. Can you tell us what might have been unique to this quarter? What here is recurring? Then if you can give us some sense for how you’re planning expenses in fiscal '11? Do you think gross profits grow at least in line with sales or less than sales?

Wade D. Miquelon - CFO: I guess the thing I would say is first gross profit, as you know we're up nicely this quarter and a couple of factors have played into it. First in the front end, we were up nicely, which was a combination of many things. It was more effective pricing, promotions, more effective – less markdowns, better buying, lots of different factors, but we feel very good about the directionality of the gross profit in the front end. If you look at the pharmacy, basically we had some help from generics in this quarter, and as you know in prior quarters, we've had some lags, but we had some help in generics and that helped to offset some of the underlying reimbursement pressure and we've also had some positive efforts in reimbursement as well. So that was effectively a mixed bag there. Going forward, what I'd really say is that our key model over time and again is to understand quarter-to-quarter, there could be some volatility, but what you should be seeing over time is our continued effort to focus on gross profit dollars and to make sure that those gross profit dollars over time are able to outrun our SG&A, and we feel pretty confident we can do that, but that's really the model that we're focusing on.

Operator: Scott Mushkin, Jefferies and Company.

Scott Mushkin - Jefferies and Company: So I was wondering if you could just give us some thoughts about SG&A dollar growth as we go into next year. I mean are we going to see that continue to be – should it be less than sales or is it going to be more than sales? How is the CCR program going to fit into that?

Gregory D. Wasson - President and CEO: I'll jump in and let Wade kind of maybe tag on a little bit. But our goal, obviously, is to keep our SG&A dollar growth trending down. We feel good with where we've been over the last quarter or two, and our bigger goal is frankly to make sure that SG&A dollar growth is less than gross profit dollar growth. So I think we feel good with where we are with Rewiring. We’re going to deliver the billion dollars that we had set out by the end of 2011. I think we’ll continue to see some improvement from the slowing down of new store openings that we called down actually on this call. And we've really got some good focus across the entire organization on just cost focus – or cost control, we got a relentless focus on cost. So, I think what we can say is, we’re focused on continuing to drive that trend down and keep it less than GP dollar growth.

Wade D. Miquelon - CFO: No, I think Greg said it all. I think we’ve done a good job of bringing it down. He’s got some reconciling items so he can see when you dig out things like new store openings and others. We’re making real progress. We feel very confident in our Rewire for Growth uptick from year-to-year and beyond that we’ve put a significant amount of efforts into looking at how we do kind of continued reengineering process improvement. So, it's really an ongoing process as improving things versus getting to one time. So, again we’re focused on driving gross profit dollars up and trying to drive SG&A dollars below that, and I think we feel very good about all of the different initiatives and interventions we put in place.