"We have a three-part strategy for growth, and the first part isto continue what we do best, grow stores," the Walgreens presidentsaid. "We're committed to organic store growth, yet at the sametime we're more open to acquisitions when the right opportunityarises."

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The second part of the Walgreens growth strategy is expandinginto adjacent sectors of pharmacy and health care service at itsstores. For example, in August the company acquired Option CareInc., a national specialty pharmacy and home infusion servicesprovider. The move made it the fourth-largest specialty pharmacyprovider in the country and the largest home infusion provider.

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Wasson described the third part of the chain's growth strategyas "using our existing store space to drive customer trafficthrough new services, like printer cartridge refills and convenientcare clinics." The chain has more than 65 clinics open today andhas set a goal of having more than 400 open by the end of calendar2008.

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The three-part strategy is designed to build upon a store baseof 5,997 at the end of the latest fiscal year, a year in which theWalgreens expansion program added 536 new stores, includingacquisitions. The company anticipates opening 550 new stores infiscal 2008, with a net increase of more than 475 stores afterrelocations and closings. Company officials say that Walgreens ison track to exceed its goal of operating 7,000 stores in 2010.

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The chain also announced plans for expanding the number oflocations of its Take Care Health Systems, the wholly ownedsubsidiary of Walgreens that manages the clinics. Take Care isopening clinics in nine new markets this fall, includingCincinnati, Cleveland, Houston, Las Vegas, Miami, Nashville, TN,Orlando and Tampa, FL and Tucson, Ariz. Combined with expansion inexisting markets, up to 100 new Take Care Health Clinics will openthis fall.

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The financial results for the full year showed that Walgreensposted its 33rd consecutive year of record earnings and sales,although the company also reported a decline in fourth quarterearnings that it attributed in part to lower reimbursements on somepopular generic drugs, along with higher expenses. Fiscal year netearnings increased 16.6% to $2 billion versus last year's $1.75billion.

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Net earnings per share for fiscal 2007 increased 18% to $2.03per diluted share versus $1.72 per share the previous year. Netearnings for the fourth quarter declined 3.8% to $397 million or 40cents per share versus last year's $412 million or 41 cents pershare. Sales rose 10.3% to $13.4 billion in the fourth quarter and13.4% to $53.8 billion for the year. Total sales in comparabledrugstores were up 6.3% for the quarter and 8.1% for the year.

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Walgreens chairman Jeffrey A. Rein said that the fourth quartersuffered from lower generic drug reimbursements, combined withhigher salary and store expenses, plus higher advertising costs."Our expenses weren't in line with the level of reimbursements wewere receiving," Rein commented. "Managing both expenses and lowerreimbursements on some generic drugs is my top priority. We'regoing to fix this, and at the same time continue our aggressivegrowth plan."

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