UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





(Mark
One)


þ
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





FOR
THE QUARTER ENDED FEBRUARY 29, 2008





OR





 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
transition period from _______to _______








Commission
File Number


1-604








WALGREEN
CO.


(Exact
name of registrant as specified in its charter)








Illinois
            36-1924025(State
      of Incorporation)
            (I.R.S.
      Employer Identification No.)





200 Wilmot Road, Deerfield,
      Illinois
            60015(Address
      of principal executive offices)
            (Zip
      Code)





(847)
914-2500


(Registrant's
telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes
      þ       No
       ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.  See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act.


Large
      accelerated filer þ                                          Accelerated
      Filer  ̈    Non-accelerated
      filer ̈





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes
       ̈        No
      þ





The
number of shares outstanding of the registrant's Common Stock, $.078125 par
value, as of February 29, 2008 was 990,456,930.

















WALGREEN
CO.





FORM
10-Q FOR THE QUARTER ENDED FEBRUARY 29, 2008





TABLE OF
CONTENTS











PART I. FINANCIAL INFORMATION


Page Reference


Item
      1.
            ConsolidatedCondensed Financial Statements
      (Unaudited)a)
            Balance Sheets
            4b)
            Statements of Earnings
            5c)
            Statements of Cash Flows
            6d)
            Notes to Financial Statements
            7Item
      2.
            Management’s Discussion and Analysis of Results of Operations
      and Financial Condition
            9Item
      3.
            Qualitative and Quantitative Disclosure about Market
      Risk
            16Item
      4.
            Controls and Procedures
            16








PART II.  OTHER INFORMATION





Item
      2.
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            17Item
      4.
            Submission of Matters to a Vote of Security
      Holders
            18Item
      6.
            Exhibits
            19












-2-


PART 1.  FINANCIAL INFORMATION




Item 1.
WALGREEN CO. ANDSUBSIDIARIES CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS




The
consolidated condensed financial statements included herein have been prepared
by the company pursuant to the rules and regulations of the Securities and
Exchange Commission.  The Consolidated Condensed Balance Sheets as of
February 29, 2008, August 31, 2007 and February 28, 2007, the Consolidated
Condensed Statements of Earnings for the three and six months ended February 29,
2008 and February 28, 2007, and the Consolidated Condensed Statements of Cash
Flows for the six months ended February 29, 2008 and February 28, 2007, have
been prepared without audit.  Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to such rules and regulations, although
the company believes that the disclosures are adequate to make the information
presented not misleading.  It is suggested that these consolidated
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the company's latest annual report
on Form 10-K.





In the
opinion of the company, the consolidated condensed statements for the unaudited
interim periods presented include all adjustments, consisting of normal
recurring adjustments, necessary to present a fair statement of the results for
such interim periods.  Because of the influence of certain holidays,
seasonal and other factors on the company's operations, net earnings for any
interim period may not be comparable to the same interim period in previous
years, nor necessarily indicative of earnings for the full year.



















































































-3-







WALGREEN CO. AND SUBSIDIARIESCONSOLIDATED
      CONDENSED BALANCE SHEETS(UNAUDITED)(In
      Millions, except shares and per share amounts)February
      29,
            
            
            August
      31,
            
            
            February
      28,2008
            
            
            2007
            
            
            2007AssetsCurrent
      Assets:Cash
      and cash equivalents
            
            $
            255.3
            
            
            $
            254.8
            
            
            $
            694.2Short-term
      investments - available for sale
            
            
            -
            
            
            
            -
            
            
            
            263.9Accounts
      receivable, net
            
            
            2,339.9
            
            
            
            2,236.5
            
            
            
            1,979.1Inventories
            
            
            7,327.7
            
            
            
            6,790.5
            
            
            
            6,531.3Other
      current assets
            
            
            220.3
            
            
            
            228.7
            
            
            
            225.4Total
      Current Assets
            
            
            10,143.2
            
            
            
            9,510.5
            
            
            
            9,693.9Non-Current
      Assets:Property
      and equipment, at cost, less accumulated depreciation and amortization of
      $3,009.9 at February 29, 2008, $2,776.6 at August 31, 2007 and $2,555.2 at
      February 28, 2007
            
            
            8,941.4
            
            
            
            8,199.9
            
            
            
            7,451.7Goodwill
            
            
            1,079.3
            
            
            
            1,060.2
            
            
            
            167.6Other
      non-current assets
            
            
            584.4
            
            
            
            543.0
            
            
            
            355.7Total
      Non-Current Assets
            
            
            10,605.1
            
            
            
            9,803.1
            
            
            
            7,975.0Total
      Assets
            
            $
            20,748.3
            
            
            $
            19,313.6
            
            
            $
            17,668.9Liabilities
      & Shareholders' EquityCurrent
      Liabilities:Short-term
      borrowings
            
            $
            727.8
            
            
            $
            878.5
            
            
            $
            -Trade
      accounts payable
            
            
            4,185.3
            
            
            
            3,733.3
            
            
            
            3,883.5Accrued
      expenses and other liabilities
            
            
            2,095.6
            
            
            
            2,104.4
            
            
            
            1,723.1Income
      taxes
            
            
            221.8
            
            
            
            28.1
            
            
            
            209.0Total
      Current Liabilities
            
            
            7,230.5
            
            
            
            6,744.3
            
            
            
            5,815.6Non-Current
      Liabilities:Deferred
      income taxes
            
            
            77.7
            
            
            
            158.2
            
            
            
            87.3Other
      non-current liabilities
            
            
            1,376.8
            
            
            
            1,306.8
            
            
            
            1,199.7Total
      Non-Current Liabilities
            
            
            1,454.5
            
            
            
            1,465.0
            
            
            
            1,287.0Shareholders'
      Equity:Preferred
      stock $.0625 par value; authorized 32 million shares, none
      issued
            
            
            -
            
            
            
            -
            
            
            
            -Common
      stock $.078125 par value; authorized 3.2 billion shares; issued
      1,025,400,000 at February 29, 2008, August 31, 2007 and February 28,
      2007
            
            
            80.1
            
            
            
            80.1
            
            
            
            80.1Paid-in
      capital
            
            
            572.6
            
            
            
            558.8
            
            
            
            563.3Employee
      stock loan receivable
            
            
            (54.5
            )
            
            
            (51.6
            )
            
            
            (66.4
            )Retained
      earnings
            
            
            12,981.8
            
            
            
            12,026.8
            
            
            
            11,240.3Accumulated
      other comprehensive loss
            
            
            (4.2
            )
            
            
            (3.9
            )
            
            
            -Treasury
      stock, at cost; 34,943,070 shares at February 29, 2008, 34,258,643 at
      August 31, 2007 and 28,621,844 at February 28, 2007
            
            
            (1,512.5
            )
            
            
            (1,505.9
            )
            
            
            (1,251.0
            )Total
      Shareholders' Equity
            
            
            12,063.3
            
            
            
            11,104.3
            
            
            
            10,566.3Total
      Liabilities & Shareholders' Equity
            
            $
            20,748.3
            
            
            $
            19,313.6
            
            
            $
            17,668.9








The
accompanying Notes to Consolidated Condensed Financial


Statements
are an integral part of these Statements.





-4-





WALGREEN CO. AND SUBSIDIARIESCONSOLIDATED
      CONDENSED STATEMENTS OF EARNINGS(UNAUDITED)(In
      Millions, except per share amounts)Three
      Months Ended
            
            
            Six
      Months EndedFebruary
      29,
            
            
            February
      28,
            
            
            February
      29,
            
            
            February
      28,2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      sales
            
            $
            15,393.6
            
            
            $
            13,933.7
            
            
            $
            29,421.5
            
            
            $
            26,642.2Costs
      and Deductions:Cost
      of sales
            
            
            10,957.4
            
            
            
            9,897.9
            
            
            
            21,071.6
            
            
            
            19,030.8Selling,
      general and administrative expenses
            
            
            3,348.0
            
            
            
            3,015.3
            
            
            
            6,533.9
            
            
            
            5,919.014,305.4
            
            
            
            12,913.2
            
            
            
            27,605.5
            
            
            
            24,949.8Interest
      (expense) income, net
            
            
            (2.5
            )
            
            
            10.2
            
            
            
            (2.1
            )
            
            
            20.8Earnings
      before income tax provision
            
            
            1,085.7
            
            
            
            1,030.7
            
            
            
            1,813.9
            
            
            
            1,713.2Income
      tax provision
            
            
            399.8
            
            
            
            378.8
            
            
            
            672.5
            
            
            
            629.6Net
      earnings
            
            $
            685.9
            
            
            $
            651.9
            
            
            $
            1,141.4
            
            
            $
            1,083.6Net
      earnings per common share:Basic
            
            $
            .69
            
            
            $
            .65
            
            
            $
            1.15
            
            
            $
            1.08Diluted
            
            $
            .69
            
            
            $
            .65
            
            
            $
            1.15
            
            
            $
            1.07Dividends
      declared
            
            $
            .0950
            
            
            $
            .0775
            
            
            $
            .1900
            
            
            $
            .1550Average
      shares outstanding
            
            
            991.1
            
            
            
            999.6
            
            
            
            991.2
            
            
            
            1,002.7Dilutive
      effect of stock options
            
            
            3.9
            
            
            
            7.6
            
            
            
            5.6
            
            
            
            7.9Average
      shares outstanding assuming dilution
            
            
            995.0
            
            
            
            1,007.2
            
            
            
            996.8
            
            
            
            1,010.6








The
accompanying Notes to Consolidated Condensed Financial


Statements
are an integral part of these Statements.








-5-




WALGREEN CO. AND SUBSIDIARIESCONSOLIDATED
      CONDENSED STATEMENTS OF CASH FLOWS(UNAUDITED)(In
      Millions)Six
      Months EndedFebruary
      29,
            
            
            February
      28,2008
            
            
            2007Cash
      flows from operating activities:Net
      earnings
            
            $
            1,141.4
            
            
            $
            1,083.6Adjustments
      to reconcile net earnings to net cash provided by operating activities
      -Depreciation
      and amortization
            
            
            396.9
            
            
            
            318.7Deferred
      income taxes
            
            
            (105.8
            )
            
            
            (45.8
            )Stock
      compensation expense
            
            
            44.6
            
            
            
            49.8Income
      tax savings from employee stock plans
            
            
            0.7
            
            
            
            3.3Other
            
            
            5.0
            
            
            
            (0.7
            )Changes
      in operating assets and liabilities -Accounts
      receivable, net
            
            
            (251.9
            )
            
            
            81.7Inventories
            
            
            (498.4
            )
            
            
            (480.9
            )Other
      assets
            
            
            0.1
            
            
            
            (0.8
            )Trade
      accounts payable
            
            
            452.0
            
            
            
            58.3Accrued
      expenses and other liabilities
            
            
            (70.4
            )
            
            
            25.8Income
      taxes
            
            
            364.1
            
            
            
            206.3Other
      non-current liabilities
            
            
            27.8
            
            
            
            69.7Net
      cash provided by operating activities
            
            
            1,506.1
            
            
            
            1,369.0Cash
      flows from investing activities:Purchases
      of short-term investments - available for sale
            
            
            -
            
            
            
            (4,170.0
            )Proceeds
      from sale of short-term investments - available for sale
            
            
            -
            
            
            
            4,329.2Additions
      to property and equipment
            
            
            (1,042.9
            )
            
            
            (818.0
            )Proceeds
      from sale of assets
            
            
            10.3
            
            
            
            19.3Business
      and intangible asset acquisitions, net of cash received
            
            
            (89.7
            )
            
            
            (46.3
            )Net
      proceeds from corporate-owned life insurance policies
            
            
            1.7
            
            
            
            -Net
      cash used for investing activities
            
            
            (1,120.6
            )
            
            
            (685.8
            )Cash
      flows from financing activities:Net
      proceeds from short-term borrowings
            
            
            (122.2
            )
            
            
            -Payments
      of debt
            
            
            (28.5
            )
            
            
            -Stock
      purchases
            
            
            (147.7
            )
            
            
            (673.1
            )Proceeds
      related to employee stock plans
            
            
            106.4
            
            
            
            144.1Cash
      dividends paid
            
            
            (188.4
            )
            
            
            (155.9
            )Bank
      overdrafts
            
            
            -
            
            
            
            (213.9
            )Other
            
            
            (4.6
            )
            
            
            (10.1
            )Net
      cash used for financing activities
            
            
            (385.0
            )
            
            
            (908.9
            )Changes
      in cash and cash equivalents:Net
      increase (decrease) in cash and cash equivalents
            
            
            0.5
            
            
            
            (225.7
            )Cash
      and cash equivalents at beginning of year
            
            
            254.8
            
            
            
            919.9Cash
      and cash equivalents at end of period
            
            $
            255.3
            
            
            $
            694.2








The
accompanying Notes to Consolidated Condensed Financial


Statements
are an integral part of these Statements.


-6-





WALGREEN CO. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS








(1) The
consolidated condensed financial statements include the accounts of the company
and its subsidiaries.  All intercompany transactions have been
eliminated.  The consolidated condensed financial statements are
prepared in accordance with accounting principles generally accepted in the
United States of America and include amounts based on management’s prudent
judgments and estimates.  Actual results may differ from these
estimates.  For a complete discussion of all our significant
accounting policies please see our 2007 annual report on Form 10-K.





We have
changed the income statement caption selling, occupancy and administration to
selling, general and administrative expenses.  The change was made to
better align income statement captions to our industry.  No
reclassifications have been made between income statement
categories.  The main components of selling, general and
administrative expenses are salaries, occupancy costs, store level expenses and
advertising.





The
balance sheet reflects the reclassification of goodwill from other non-current
assets.  The cash flow statement contains reclassifications of
previously condensed lines within the operating activities section.





(2)
Inventories are valued on a lower of last-in, first-out (LIFO) cost or market
basis.  At February 29, 2008, August 31, 2007 and February 28, 2007,
inventories would have been greater by $1,026.3 million, $968.8 million and
$940.3 million respectively, if they had been valued on a lower of first-in,
first-out (FIFO) cost or market basis.  LIFO inventory costs can only
be determined annually when inflation rates and inventory levels are finalized;
therefore, LIFO inventory costs for interim financial statements are estimated.
Inventory includes product cost, inbound freight, warehousing costs and vendor
allowances not included as a reduction of advertising expense.





(3) The
principal retirement plan for employees is the Walgreen Profit-Sharing
Retirement Trust to which both the company and participating employees
contribute.  The company's contribution, which is determined annually
at the discretion of the Board of Directors, has historically related to pre-tax
income.  The profit-sharing provision was $96.6 million for the second
quarter and $161.4 million for the six month period of this fiscal
year.  This compares to $91.7 million and $152.4 million for the same
periods last year.  The company’s contributions, which are made
annually in the second quarter, were $261.1 million during the current
quarter.  This compares to $253.0 million for the prior
year.





(4) Total
stock-based compensation expense was $13.3 million for the quarter ended
February 29, 2008 and $44.6 million for the six month period compared to $15.3
million and $49.8 million for the comparable periods last year.  In
accordance with Statement of Financial Accounting Standards (SFAS) No. 123(R),
compensation expense is recognized on a straight-line basis over the employee's
vesting period or to the employee's retirement eligible date, if
earlier.  There was no fully recognized retiree eligible expense
recorded in the current quarter and $16.0 million recorded for the first six
months.  This compares to fully recognized retiree eligible expense of
$1.3 million and $15.1 million for the quarter and six months ended February 28,
2007.  Therefore, the compensation expense for the quarter and six
month periods are not representative of the compensation expense for the entire
fiscal year.  There were no significant grants in the current or prior
year’s quarter.  There have been no material changes in the
assumptions used to compute compensation expense during the current quarter or
year.





(5) The
company provides certain health insurance benefits for retired employees who
meet eligibility requirements, including age, years of service and date of
hire.  The costs of these benefits are accrued over the period earned.
The company's postretirement health benefit plans are not funded.





Three
      Months Ended
            
            
            Six
      Months EndedComponents
      of Net Periodic Benefit Costs
            
            February
      29,
            
            
            February
      28,
            
            
            February
      29,
            
            
            February
      28,(In Millions)
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007Service
      cost
            
            $
            3.5
            
            
            $
            3.4
            
            
            $
            7.0
            
            
            $
            6.8Interest
      cost
            
            
            5.9
            
            
            
            5.5
            
            
            
            11.8
            
            
            
            11.0Amortization
      of actuarial loss
            
            
            1.4
            
            
            
            1.4
            
            
            
            2.8
            
            
            
            2.8Amortization
      of prior service cost
            
            
            (1.1
            )
            
            
            (1.1
            )
            
            
            (2.2
            )
            
            
            (2.1
            )Total
      postretirement benefit cost
            
            $
            9.7
            
            
            $
            9.2
            
            
            $
            19.4
            
            
            $
            18.5




-7-


(6) The
company guarantees a credit agreement on behalf of SureScripts, LLC which
provides electronic prescription data services.  This credit
agreement, for which SureScripts, LLC is primarily liable, has an expiration
date of February 16, 2010.  The liability was $7.3 million at February
29, 2008, $3.3 at August 31, 2007 and $2.0 million at February 28,
2007.  The maximum amount of future payments that could be required to
be paid under the guaranty is $25.0 million, of which $12.5 million may be
recoverable from another guarantor.





(7) We
adopted the provisions of Financial Accounting Standards Board (“FASB”)
Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income
Taxes – an Interpretation of FASB Statement No. 109, effective September
1, 2007.  FIN No. 48 provides guidance regarding the recognition,
measurement, presentation and disclosure in the financial statements of tax
positions taken or expected to be taken on a tax return, including the decision
whether to file or not to file in a particular jurisdiction.  The
adoption of FIN No. 48 resulted in the reclassification of $55.4 million of
certain tax liabilities from current to long-term and a $1.9 million decrease in
our liability for unrecognized tax benefits, which was accounted for as an
increase to the August 31, 2007 retained earnings balance.





At
September 1, 2007, our total liability for unrecognized tax benefits, after the
adoption of FIN No. 48, was $55.4 million, of which $22.7 million represented
tax benefits that, if recognized, would favorably impact the effective tax
rate.  Our liability for unrecognized tax benefits was $58.1 million
at February 29, 2008, of which $26.4 million represented tax benefits that, if
recognized, would favorably impact the effective tax rate.





We
recognize interest and penalties in income tax provision in our consolidated
statements of earnings.  At September 1, 2007 and February 29, 2008,
we had accrued interest and penalties of $7.6 million and $12.1 million,
respectively.





We file a
consolidated U.S. federal income tax return, as well as income tax returns in
various states.  With few exceptions, we are no longer subject to U.S.
federal, state and local income tax examinations by tax authorities for years
before fiscal 2003. During the second quarter, we reached an agreement with the
Internal Revenue Service on fiscal years 2004 and 2005 resulting in a $7.4
million refund primarily arising from the carry back of foreign tax
credits.





It is
reasonably possible that the amount of the unrecognized tax benefit with respect
to certain unrecognized tax positions will increase or decrease during the next
12 months; however, we do not expect the change to have a material effect on our
results of operations or our financial position.





The
September 1, 2007 amounts above have been modified from those previously
reported as a result of a clarification on the disclosure of unrecognized tax
benefits and interest and penalties.  There was no impact to the
consolidated condensed Balance Sheets, Statements of Earnings or Statements of
Cash Flows and the impact to our disclosure was immaterial.





(8)The dilutive effect of
outstanding stock options on earnings per share is calculated using the treasury
stock method.  Stock options are anti-dilutive and excluded from the
earnings per share calculation if the exercise price exceeds the average market
price of the common shares for the periods presented.  At February 29,
2008 and February 28, 2007, 12,880,046 and 6,952,844 outstanding options to
purchase common shares were excluded from the calculation.





(9) In
fiscal 2008, the company issued commercial paper to support working capital
needs.  The short-term debt under the commercial paper program was as
follows (dollars in millions):





February
      29, 2008
            
            
            February
      28, 2007Balance
      outstanding
            
            $
            727.8
            
            
            
            -Maximum
      outstanding at any month-end
            
            
            1,166.5
            
            
            
            -Average
      daily short-term borrowings
            
            
            783.0
            
            
            
            -Weighted-average
      interest rate
            
            
            2.99
            %
            
            
            -
            %





In
connection with our commercial paper program, we maintain two unsecured backup
syndicated lines of credit that total $1.2 billion.  The first $600
million facility expires on August 12, 2008, the second on August 12,
2012.  Our ability to access these facilities is subject to our
compliance with the terms and conditions of the credit facilities, including
financial covenants.  The covenants require us to maintain certain
financial ratios related to minimum net worth and priority debt, along with
limitations on the sale of assets and purchases of investments.  As of
February 29, 2008 we were in compliance with all such covenants.  On
October 12, 2007, we entered into an additional $100 million unsecured line of
credit facility and on November 30, 2007 this credit facility was amended and
increased to include an additional $200 million, for a total of $300 million
unsecured credit.  This line of credit is subject to similar covenants
as the syndicated lines of credit.  The company pays a facility fee to
the financing bank to keep this line of credit facility active.  This
facility expired as of December 31, 2007.  As of February 29, 2008,
there have been no borrowings against the credit facilities.





-8-


(10)
Non-cash transactions for the first six months ended February 29, 2008 and
February 28, 2007 include $69.1 million and $1.8 million, respectively in
accrued liabilities related to the purchase of property and
equipment.





(11)  On
March 14, 2008 we entered into an agreement and plan of merger with I-trax, Inc.
(“I-trax”), to acquire all of the outstanding shares of I-trax at a price per
share equal to $5.40 per common share and $54.00 plus accrued and unpaid
dividends per share of preferred stock.  We expect to pay $278 million
in cash including the assumption of $18.3 million in net debt for this
transaction.  I-trax provides worksite health services, including
primary and acute care, wellness, pharmacy and disease management services and
health and fitness programming.  Also on March 14, 2008 we entered
into an agreement to acquire Whole Health Management, a privately held company
that provides primary care, urgent care, wellness programs, heath coaching and
occupational health services through worksite health centers.  Both
agreements are expected to close within 60 days and are subject to regulatory
approvals and other customary conditions.







Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION





INTRODUCTION





Walgreens
is principally a retail drugstore chain that sells prescription and
non-prescription drugs and general merchandise.  General merchandise
includes, among other things, beauty care, personal care, household items,
candy, photofinishing, greeting cards, seasonal items and convenience
food.  Customers can have prescriptions filled at the drugstore
counter, as well as through the mail, by telephone and via the
Internet.  As of February 29, 2008, we operated 6,237 locations
(including two mail service facilities, 89 home care facilities and 12 specialty
pharmacies) located in 49 states and Puerto Rico.  The total location
count of 6,237 does not include the 146 convenient care clinics operated by Take
Care Health Systems, Inc.





The
drugstore industry is highly competitive.  In addition to other
drugstore chains, independent drugstores and mail order prescription providers,
we also compete with various other retailers including grocery stores,
convenience stores, mass merchants and dollar stores.





Prescription
sales continue to become a larger portion of the company’s
business.  The long-term outlook for prescription sales is strong due
in part to the aging population, the introduction of lower priced generics and
the continued development of innovative drugs that improve quality of life and
control healthcare costs.  Certain provisions relating to Medicaid
reimbursement rates for generic drugs from the Deficit Reduction Act of 2005 may
become effective during fiscal 2008 and are expected to reduce our
reimbursement.





Front-end
sales have continued to grow due to strengthening core categories, such as
over-the-counter non-prescription drugs, beauty care and personal care
products.  Walgreens strong name recognition continues to drive
private brand sales, which are included in these core categories.





We
continue to expand into new markets and increase penetration in existing
markets. To support our growth, we are investing significantly in prime
locations, technology and customer service initiatives.  Retail
organic growth continues to be our primary growth vehicle; however,
consideration is given to acquisitions that provide a unique opportunity and
strategic fit for our business.




-9-


OPERATING
STATISTICS





Percentage
      IncreasesThree
      Months Ended
            
            
            Six
      Months EndedFebruary
      29,
            
            
            February
      28,
            
            
            February
      29,
            
            
            February
      28,2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      Sales
            
            
            10.5
            
            
            
            14.6
            
            
            
            10.4
            
            
            
            15.5Net
      Earnings
            
            
            5.2
            
            
            
            24.5
            
            
            
            5.3
            
            
            
            24.7Comparable
      Drugstore Sales
            
            
            4.7
            
            
            
            8.9
            
            
            
            5.1
            
            
            
            9.3Prescription
      Sales
            
            
            11.1
            
            
            
            16.4
            
            
            
            11.1
            
            
            
            17.5Comparable
      Drugstore Prescription Sales
            
            
            5.2
            
            
            
            10.9
            
            
            
            5.5
            
            
            
            11.4Front-End
      Sales
            
            
            9.4
            
            
            
            13.0
            
            
            
            9.3
            
            
            
            12.8Comparable
      Drugstore Front-End Sales
            
            
            4.0
            
            
            
            5.7
            
            
            
            4.3
            
            
            
            5.7Gross
      Profit
            
            
            9.9
            
            
            
            16.7
            
            
            
            9.7
            
            
            
            17.8Selling,
      General and Administrative Expenses
            
            
            11.0
            
            
            
            14.3
            
            
            
            10.4
            
            
            
            16.1







Percent
      to SalesThree Months Ended
            
            
            Six Months EndedFebruary
      29,
            
            
            February
      28,
            
            
            February
      29,
            
            
            February
      28,2008
            
            
            2007
            
            
            2008
            
            
            2007Gross
      Margin
            
            
            28.8
            
            
            
            29.0
            
            
            
            28.4
            
            
            
            28.6Selling,
      General and Administrative Expenses
            
            
            21.7
            
            
            
            21.6
            
            
            
            22.2
            
            
            
            22.2








Other
      StatisticsThree Months Ended
            
            
            Six Months EndedFebruary
      29,
            
            
            February
      28,
            
            
            February
      29,
            
            
            February
      28,2008
            
            
            2007
            
            
            2008
            
            
            2007Prescription
      Sales as a % of Net Sales
            
            
            62.8
            
            
            
            62.4
            
            
            
            64.4
            
            
            
            64.0Third
      Party Sales as a % of Total Prescription Sales
            
            
            95.1
            
            
            
            94.7
            
            
            
            95.1
            
            
            
            94.7Total
      Number of Prescriptions (in millions)
            
            
            157.4
            
            
            
            147.0
            
            
            
            308.4
            
            
            
            287.9Total
      Number of Locations
            
            
            
            
            
            
            
            
            
            
            6,237
            
            
            
            5,641





RESULTS
OF OPERATIONS





Net
earnings for the second quarter ended February 29, 2008 were $685.9 million or
$0.69 per share (diluted).  This was a 5.2% increase in net earnings
over the second quarter last year.  The net earnings increase resulted
from improved sales which were partially offset by lower gross margin rates and
higher expense ratios.  Net earnings for the six months increased 5.3%
to $1.141 billion or $1.15 per share (diluted) primarily attributed to improved
sales partially offset by lower gross margin rates.





Net sales
for the second quarter increased by 10.5% to $15.4 billion, and rose by 10.4% to
$29.4 billion for the first six months.  Drugstore sales increases
resulted from sales gains in existing stores and added sales from new stores,
each of which include an indeterminate amount of market-driven price
changes.  Sales in comparable drugstores were up 4.7% for the quarter
and 5.1% for the six month period.  Comparable drugstores are defined
as those that have been open for at least twelve consecutive months without
closure for seven or more consecutive days and without a major remodel or a
natural disaster in the past twelve months.  This year’s sales
benefited from one extra day versus last year because of leap
year.  Relocated and acquired stores are not included as comparable
stores for the first twelve months after the relocation or
acquisition.  We operated 6,237 locations as of February 29, 2008,
compared to 5,641 a year earlier.





Prescription
sales increased 11.1% for both the current quarter and first six months and
represented 62.8% and 64.4% of total sales, respectively.  In the
prior year, prescription sales increased 16.4% and 17.5% for the quarter and
year to date, respectively, and comprised 62.4% and 64.0% of total
sales.  Comparable drugstore prescription sales were up 5.2% in the
current quarter and 5.5% for the six month period.  The effect of
generic drugs, which have a lower retail price, replacing brand name drugs
reduced prescription sales by 4.4% in the current quarter and 4.3% for the six
month period versus 3.6% and 3.2% for the same periods last
year.  Third party sales, where reimbursement is received from managed
care organizations as well as government and private insurance, were 95.1% of
prescription sales compared to 94.7% a year ago.  The total number of
prescriptions filled for the second quarter was approximately 157.4 million
compared to 147.0 million for the same period last year.




-10-


Front-end
sales increased 9.4% for the current quarter and 9.3% for the first six months
and were 37.2% and 35.6% of total sales.  In comparison, prior year
front end sales increased 13.0% and 12.8% and comprised 37.6% and 36.0% of total
sales.  The increase is due in part to improved sales dollars related
to non-prescription drugs, convenience foods and beauty care
items.  Comparable front-end sales increased 4.0% in the current
quarter and 4.3% for the first six months compared to 5.7% in both periods last
year.





Gross
margins as a percent of sales were 28.8% in the current quarter and 28.4% for
the first six months, compared to 29.0% and 28.6% last year.  The
decline was caused by lower front-end margins, as a result of a shift in sales
mix to lower margin items, softer seasonal sales in December and digital photo
promotions.  In addition, gross margins declined due to the continuing
shift in sales mix toward our prescription businesses, which carry lower margins
than front-end merchandise.  This was partially offset by an overall
improvement in pharmacy margins, which were positively influenced by generic
drug sales, but negatively influenced by our acquisition of Option Care,
Inc.





We use
the LIFO method of inventory valuation, which can only be determined annually
when inflation rates and inventory levels are finalized; therefore, LIFO
inventory costs for interim financial statements are estimated.  Cost
of sales included a LIFO provision of $30.6 million ($.02 per share, diluted)
and $57.5 million ($.03 per share, diluted) for the quarter and six month
periods ended February 29, 2008, versus $13.4 million ($.01 per share, diluted)
and $40.8 million ($.02 per share, diluted) for the same period a year
ago.  The estimated annual inflation rate was 1.50% for the current
quarter and six month period.  Last year, in the second quarter, the
estimated annual inflation rate was reduced to 1.25% from 1.75%, primarily due
to lower than projected prescription inflation.





Gross
profit increased 9.9% in the current quarter and 9.7% for the first six
months.  Last year gross profit increased 16.7% in the second quarter
and 17.8% for the six month period.  The change from the prior year is
due to lower sales growth in comparison to last year and lower gross profit
contribution from generic versions of the name brand drugs Zocor and
Zoloft.





Selling,
general and administrative expenses as a percent of sales were 21.7% in the
current quarter and 22.2% for the first six months compared to 21.6% and 22.2% a
year ago.  Higher store level related expenses, closing costs and
other miscellaneous expenses were offset by lower insurance costs and provisions
for legal matters as a percentage of sales in the current
quarter.  For the first six months higher store level expenses and
salaries were offset by lower provisions for legal matters and lower insurance
costs as a percentage of sales.





Selling,
general and administrative expenses increased 11.0% in this year’s second
quarter and 10.4% for the first six months, versus 14.3% and 16.1% last year due
primarily to store level salaries.  Although store level salaries
increased at a faster rate than sales, the rate of growth was lower than the
prior year.  Lower legal expenses and insurance also contributed to
the improvement.  Partially offsetting these improvements were higher
store level expenses.





Interest
was a net expense of $2.5 million for the second quarter ended February 29, 2008
and $2.1 million year to date, compared to income of $10.2 million and $20.8
million last year.  The change in net interest over the prior year and
quarter is attributed to the change in short term debt and investments available
for sale.  Interest expense for the current quarter and year to date
is net of $5.2 million and $11.8 million which was capitalized as a part of
significant construction projects.  Last year we capitalized $1.0
million and $2.0 million for the quarter and year to date as a part of
significant construction projects.





The
effective tax rate was 36.8% for the second quarter and 37.1% for the six months
period this fiscal year as compared to 36.8% for the quarter and six month
periods a year ago.  The increase in the year to date effective tax
rate is due to additional provisions for state tax matters.





-11-





CRITICAL
ACCOUNTING POLICIES





The
consolidated condensed financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America and
include amounts based on management's prudent judgments and
estimates.  Actual results may differ from these
estimates.  Management believes that any reasonable deviation from
those judgments and estimates would not have a material impact on our
consolidated financial position or results of operations.  To the
extent that the estimates used differ from actual results, however, adjustments
to the statement of earnings and corresponding balance sheet accounts would be
necessary.  These adjustments would be made in future
statements.  For a complete discussion of all our significant
accounting policies please see our 2007 annual report on Form
10-K.  Some of the more significant estimates include goodwill and
other intangible asset impairment, allowance for doubtful accounts, vendor
allowances, liability for closed locations, liability for insurance claims and
cost of sales.  We use the following methods to determine our
estimates:





Goodwill
      and other intangible asset impairment -Goodwill
      and other indefinite-lived intangible assets are not amortized, but are
      evaluated for impairment annually or whenever events or changes in
      circumstances indicate that the value of a certain asset may be
      impaired.  The process of evaluating goodwill for impairment
      involves the determination of fair value.  Inherent in such fair
      value determinations are certain judgments and estimates, including the
      interpretation of economic indicators and market valuations and
      assumptions about our business plans.  We have not made any
      material changes to the method of evaluating goodwill and intangible asset
      impairments during the last three years.  Based on current
      knowledge, we do not believe there is a reasonable likelihood that there
      will be a material change in the estimate or assumptions used to determine
      impairment.Allowance
      for doubtful accounts -The
      provision for bad debt is based on both specific receivables and historic
      write-off percentages.  We have not made any material changes to
      the method of estimating our allowance for doubtful accounts during the
      last three years.  Based on current knowledge, we do not believe
      there is a reasonable likelihood that there will be a material change in
      the estimate or assumptions used to determine the
    allowance.Vendor
      allowances -Vendor
      allowances are principally received as a result of purchase levels, sales
      or promotion of vendors' products.   Allowances are
      generally recorded as a reduction of inventory and are recognized as a
      reduction of cost of sales when the related merchandise is
      sold.  Those allowances received for promoting vendors' products
      are offset against advertising expense and result in a reduction of
      selling, general and administrative expenses to the extent of advertising
      incurred, with the excess treated as a reduction of inventory
      costs.  We have not made any material changes to the method of
      estimating our vendor allowances during the last three
      years.  Based on current knowledge, we do not believe there is a
      reasonable likelihood that there will be a material change in the estimate
      or assumptions used to determine vendor allowances.Liability
      for closed locations -The
      liability is based on the present value of future rent obligations and
      other related costs (net of estimated sublease rent) to the first lease
      option date.  We have not made any material changes to the
      method of estimating our liability for closed locations during the last
      three years.  Based on current knowledge, we do not believe
      there is a reasonable likelihood that there will be a material change in
      the estimate or assumptions used to determine the
    liability.Liability
      for insurance claims -The
      liability for insurance claims is recorded based on estimates for claims
      incurred.  The provisions are estimated in part by considering
      historical claims experience, demographic factors and other actuarial
      assumptions and are not discounted.  We have not made any
      material changes to the method of estimating our liability for insurance
      claims during the last three years.  Based on current knowledge,
      we do not believe there is a reasonable likelihood that there will be a
      material change in the estimate or assumptions used to determine the
      liability.Cost
      of sales -Drugstore
      cost of sales is derived based on point-of-sale scanning information with
      an estimate for shrinkage and adjusted based on periodic
      inventories.  Inventories are valued at the lower of cost or
      market determined by the LIFO method.  We have not made any
      material changes to the method of estimating cost of sales during the last
      three years.  Based on current knowledge, we do not believe
      there is a reasonable likelihood that there will be a material change in
      the estimate or assumptions used to determine cost of
    sales.





-12-





LIQUIDITY
AND CAPITAL RESOURCES





Cash and
cash equivalents were $255.3 million at February 29, 2008, compared to $694.2
million at February 28, 2007.  Short-term investment objectives are to
minimize risk, maintain liquidity and maximize after-tax yields.  To
attain these objectives, investment limits are placed on the amount, type and
issuer of securities.  Investments are principally in top-tier money
market funds.





Net cash
provided by operating activities for the six months ended February 29, 2008 was
$1.506 billion compared to $1.369 billion a year ago.  Higher net
earnings, increased payables and lower estimated tax payments were partially
offset by a decrease in accounts receivable.  The decrease in cash
from accounts receivable and the increase in cash from accounts payable are
primarily attributed to the loss of the UnitedHealth Group’s Ovations unit
contract in our pharmacy benefit management business as of December 31,
2006.  Cash provided by operations is the principal source of funds
for expansion, acquisitions, remodeling programs, dividends to shareholders and
stock repurchases.  In fiscal 2008, we supplemented cash provided by
operations with short-term borrowings.





Net cash
used for investing activities was $1.121 billion versus $685.8 million last
year.  We did not engage in auction rate security sales or purchases
in the current year.  Proceeds for the sale of auction rate security
exceeded the purchases of such securities by $159.2 million a year
ago.





Additions
to property and equipment were $1.043 billion compared to $818.0 million last
year.  In total, there were 290 new or relocated stores (net 240)
added during the first six months.  This compares to 223 (net 180) in
the same period last year.  New stores are owned or
leased.  There were 104 owned locations added during the first six
months and 70 under construction at February 29, 2008 versus 85 owned locations
added and 61 under construction as of February 28, 2007.





Capital
expenditures for fiscal 2008 are expected to be more than $2.0 billion,
excluding business acquisitions.  We expect to open 550 new stores in
fiscal 2008, with a net increase of more than 475 stores and anticipate having a
total of more than 7,000 locations in 2010. We are continuing to relocate stores
to more convenient and profitable freestanding locations.  In addition
to new stores, expenditures are planned for distribution centers and
technology.  A new distribution center in Windsor, Connecticut is
anticipated to open in fiscal 2009.





Net cash
used by financing activities was $385.0 million compared to $908.9 million last
year.  Net proceeds from short-term borrowings during the period were
$122.2 million.  Shares totaling $147.7 million were purchased to
support the needs of the employee stock plans during the current period as
compared to $204.9 million a year ago.  Included in the prior year was
$343.2 million of company shares for the 2004 stock repurchase
program.  On January 10, 2007, a new stock repurchase program (“2007
repurchase program”) of up to $1 billion was announced to be executed over four
years.  Purchases of company shares relating to the 2007 repurchase
program made in the prior year were $125.0 million.  No repurchases
were made during the current quarter and we do not anticipate executing stock
repurchases under the 2007 repurchase program while having short-term debt
outstanding.  We will continue to repurchase shares to support the
needs of the employee stock plans.   In the first six months of
the current year, we had proceeds related to employee stock plans of $106.4
million versus $144.1 million for the same period last year.  Cash
dividends paid were $188.4 million during the first six months versus $155.9
million for the same period a year ago.  A $213.9 million wire
transfer made on August 31, 2006, was not accepted by our disbursement bank
until September 1, resulting in a bank overdraft at fiscal year-end and
subsequent repayment on September 1.





We had
$727.8 million of commercial paper outstanding at a weighted average interest
rate of 2.99% at February 29, 2008.  In connection with our commercial
paper program, we maintain two unsecured backup syndicated lines of credit that
total $1.2 billion.  The first $600 million facility expires on August
12, 2008, the second on August 12, 2012.  Our ability to access these
facilities is subject to our compliance with the terms and conditions of the
credit facilities, including financial covenants.  The covenants
require us to maintain certain financial ratios related to minimum net worth and
priority debt, along with limitations on the sale of assets and purchases of
investments.  As of February 29, 2008 we were in compliance with all
such covenants.  On October 12, 2007, we entered into an additional
$100 million unsecured line of credit facility and on November 30, 2007 this
credit facility was amended and increased to include an additional $200 million,
for a total of $300 million unsecured credit.  This line of credit is
subject to similar covenants as the syndicated lines of credit.  The
company pays a facility fee to the financing bank to keep this line of credit
facility active.  This facility expired as of December 31,
2007.  As of February 29, 2008, there have been no borrowings against
the credit facilities.  We do not expect any borrowings under these
facilities, together with our outstanding commercial paper, to exceed $1.2
billion.





-13-
 On March
14, 2008 we entered into an agreement and plan of merger with I-trax, Inc.
(“I-trax”), to acquire all of the outstanding shares of I-trax at a price per
share equal to $5.40 per common share and $54.00 plus accrued and unpaid
dividends per share of preferred stock.  We expect to pay $278 million
in cash including the assumption of $18.3 million in net debt for this
transaction.  I-trax provides worksite health services, including
primary and acute care, wellness, pharmacy and disease management services and
health and fitness programming.  Also on March 14, 2008 we entered
into an agreement to acquire Whole Health Management, a privately held company
that provides primary care, urgent care, wellness programs, heath coaching and
occupational health services through worksite health centers.  Both
agreements are expected to close within 60 days and are subject to regulatory
approvals and other customary conditions.  We expect to fund these and
future acquisitions with commercial paper and short term
notes.





Our
credit ratings as of February 29, 2008, were as follows:





Rating
      Agency
            Long-Term
      Debt Rating
            Outlook
            Commercial
      Paper Rating
            OutlookMoody's
            Aa3
            Negative
            P-1
            StableStandard
      & Poor's
            A+
            Stable
            A-1
            Stable





In
assessing our credit strength, both Moody's and Standard & Poor's consider
our business model, capital structure, financial policies and financial
statements.  Our credit ratings impact our future borrowing costs,
access to capital markets and operating lease costs.




CONTRACTUAL
OBLIGATIONS AND COMMITMENTS





The
following table lists our contractual obligations and commitments as of February
29, 2008:





Payments
      Due by Period (In Millions)Total
            
            
            Less
      than 1 Year
            
            
            1-3
      Years
            
            
            3-5
      Years
            
            
            Over
      5 YearsOperating
      leases (1)
            
            $
            30,678.6
            
            
            $
            1,701.3
            
            
            $
            3,590.0
            
            
            $
            3,514.7
            
            
            $
            21,872.6Purchase
      obligations (2):Open
      inventory purchase orders
            
            
            1,070.0
            
            
            
            1,070.0
            
            
            
            -
            
            
            
            -
            
            
            
            -Real
      estate development
            
            
            1,128.8
            
            
            
            1,121.7
            
            
            
            7.1
            
            
            
            -
            
            
            
            -Other
      corporate obligations
            
            
            584.0
            
            
            
            271.0
            
            
            
            238.5
            
            
            
            41.1
            
            
            
            33.4Insurance*
            
            
            481.8
            
            
            
            155.4
            
            
            
            147.9
            
            
            
            86.4
            
            
            
            92.1Retiree
      health*
            
            
            385.5
            
            
            
            9.0
            
            
            
            21.8
            
            
            
            26.9
            
            
            
            327.8Closed
      location obligations*
            
            
            70.8
            
            
            
            17.7
            
            
            
            20.9
            
            
            
            12.2
            
            
            
            20.0Capital
      lease obligations *(1)
            
            
            39.0
            
            
            
            1.1
            
            
            
            2.4
            
            
            
            2.8
            
            
            
            32.7Other
      long-term liabilities reflected on the balance sheet*
            
            
            635.4
            
            
            
            52.5
            
            
            
            90.9
            
            
            
            90.9
            
            
            
            401.1Total
            
            $
            35,073.9
            
            
            $
            4,399.7
            
            
            $
            4,119.5
            
            
            $
            3,775.0
            
            
            $
            22,779.7


*
Recorded on balance sheet.


(1)
            Amounts
      for operating leases and capital leases do not include certain operating
      expenses under the leases such as common area maintenance, insurance and
      real estate taxes.  These expenses for the company's most recent
      fiscal year were $255.6 million.(2)
            The
      purchase obligations include agreements to purchase goods or services that
      are enforceable and legally binding and that specify all significant
      terms, including open purchase
orders.





OFF-BALANCE
SHEET ARRANGEMENTS





Letters
of credit are issued to support purchase obligations and commitments (as
reflected on the Contractual Obligations and Commitments table) as follows (In
Millions):





Insurance
            $
      270.7Inventory
      obligations
            45.4Real
      estate development
            13.6Other
            8.1Total
            $
337.8





We have
no other off-balance sheet arrangements other than those disclosed on the
Contractual Obligations and Commitments table and a credit agreement guaranty on
behalf of SureScripts, LLC.  This agreement is described more fully in
Note 6 in the Notes to Consolidated Condensed Financial Statements.





Both
on-balance sheet and off-balance sheet financing are considered when targeting
debt to equity ratios to balance the interests of equity and debt (including
real estate) investors.  This balance allows us to lower our cost of
capital while maintaining a prudent level of financial risk.




-14-





RECENT
ACCOUNTING PRONOUNCEMENTS





In
December 2007, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 160 “Noncontrolling Interest in Consolidated Financial Statements –
an amendment of Accounting Research Bulletin (“ARB”) No. 51.  The
objective of this statement is to improve the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements by establishing accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary.  The statement significantly changes
the accounting for transactions with minority interest holders.  This
statement, which will be effective for the first quarter of fiscal 2010, is not
expected to have a material impact on our consolidated financial position or
results of operations.





In
December 2007, the FASB issued SFAS No 141(R) “Business
Combinations”.  This statement establishes principles and requirements
for how the acquirer recognizes and measures identifiable assets acquired,
liabilities assumed and any noncontrolling interest in a business
combination.  In addition the statement provides a revised definition
of a business, shifts from the purchase method to the acquisition method,
expenses acquisition-related transaction costs, recognizes contingent
consideration and contingent assets and liabilities at fair value and
capitalizes acquired in-process research and development. This statement, which
will be effective for the first quarter of fiscal 2010, will be applied
prospectively to business combinations.





In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements.”  This statement defines and provides guidance when
applying fair value measurements to accounting pronouncements that require or
permit such measurements.  This statement and its related
pronouncements, which will be effective first quarter of fiscal 2009, is not
expected to have a material impact on our consolidated financial position or
results of operations.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.”  This statement gives
entities the option to carry most financial assets and liabilities as fair
value, with changes in fair value recorded in earnings.  We are
currently evaluating whether we intend to adopt this voluntary statement, which
would be effective first quarter of fiscal 2009.





In June
2007, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No.
06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment
Awards.”  EITF 06-11 states that an entity should recognize a realized
tax benefit associated with dividends on certain nonvested equity shares and
options and an increase in additional paid-in capital.  The benefit
should be included in the pool of excess tax benefits available to absorb
potential future tax liabilities.  This issue should be applied
prospectively for share-based awards declared beginning in fiscal
2009.  The company does not expect the adoption of EITF 06-11 to have
a material impact on its consolidated financial position or results of
operations.








CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS





Certain
information in this Form 10-Q, as well as in other public filings, the company
website, press releases and oral statements made by our representatives, is
forward-looking information based on current expectations and plans that involve
risks and uncertainties.  Forward-looking information includes
statements concerning pharmacy sales trends, prescription margins, number and
location of new store openings, outcomes of litigation, the level of capital
expenditures, demographic trends; as well as those that include or are preceded
by the words "expects," "estimates," "believes," "plans," "anticipates" or
similar language.  For such statements, we claim the protection of the
safe harbor provisions of the Private Securities Litigation Reform Act of
1995.





Forward-looking
statements may involve risks and uncertainties, known or unknown to the company,
which could cause results to differ materially from management expectations as
projected in such forward-looking statements.  A discussion of
important factors relating to forward-looking statements is set forth in the
company’s documents filed with the Securities and Exchange Commission, including
its Form 10-K for the period ended August 31, 2007.  Unless otherwise
required by applicable securities laws, the company assumes no obligation to
update its forward-looking statements to reflect subsequent events or
circumstances.


-15-


Item 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT
MARKET RISK





Management
does not believe that there is any material market risk exposure with respect to
derivative or other financial instruments that would require disclosure under
this item.





Item 4.  CONTROLS AND PROCEDURES





Based on
their evaluation as of February 29, 2008, pursuant to Exchange Act Rule
13a-15(b), the company's management, including its Chief Executive Officer and
Chief Financial Officer, believe the company's disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e)) are
effective.





In
connection with the evaluation pursuant to Exchange Act Rule 13a-15(d) of the
company's internal control over financial reporting (as defined in Exchange Act
Rule 13a-15(f)) by the company's management, including its Chief Executive
Officer and Chief Financial Officer, no changes during the quarter ended
February 29, 2008 were identified that have materially affected, or are
reasonably likely to materially affect, the company's internal control over
financial reporting.





-16-





PART II.  OTHER
  INFORMATION





Item
      2.  UNREGISTERED SALES OF EQUITY
      SECURITIES AND USE OF PROCEEDS





(c)
            The
      following table provides information about purchases by the company during
      the quarter ended February 29, 2008 of equity securities that are
      registered by the company pursuant to Section 12 of the Exchange
      Act:





ISSUER
      PURCHASES OF EQUITY SECURITIESPeriod
            
            Total
      Number of Shares Purchased
      (1)
            
            
            Average
      Price Paid per Share
            
            
            Total
      Number of Shares Purchased as Part of Publicly Announced Plans orPrograms
            
            
            Approximate
      Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)12/1/2007
      - 12/31/2007
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            $
            655,123,8211/1/2008
      - 1/31/2008
            
            
            1,000,000
            
            
            $
            33.8264420
            
            
            
            -
            
            
            $
            655,123,8212/1/2008
      -2/29/2008
            
            
            1,000,000
            
            
            $
            35.5286510
            
            
            
            -
            
            
            $
            655,123,821Total
            
            
            2,000,000
            
            
            $
            34.6775465
            
            
            
            -
            
            
            $
            655,123,821





(1)
            The
      company repurchased an aggregate of 2,000,000 shares of its common stock
      in open-market transactions to satisfy the requirements of the company's
      employee stock purchase and option plans, as well as the company's
      Nonemployee Director Stock Plan.(2)
            On
      January 10, 2007, the Board of Directors approved a stock repurchase
      program ("2007 repurchase program"), pursuant to which up to $1 billion of
      the company's common stock may be purchased prior to the expiration date
      of the program on January 20, 2011.  This program was announced
      in the company's report on Form 8-K, which was filed on January 11,
      2007.  The total remaining authorization under the repurchase
      program as $655,123,821 as of February 29,
2008.





-17-





Item 4. SUBMISSION OF MATTERSTO A VOTE OF SECURITY
HOLDERS





(a)
            The
      company held its Annual Meeting of Shareholders on January 9,
      2008.(c)
            (1)
      The shareholders voted for election of the following directors to serve
      until the next annual meeting or until their successors are elected and
      qualified:





Votes
      For
            
            
            Votes
      WithheldWilliam
      C. Foote
            
            
            871,527,768
            
            
            
            27,503,587Alan
      G. McNally
            
            
            883,230,131
            
            
            
            15,801,224Cordell
      Reed
            
            
            879,927,077
            
            
            
            19,104,279Jeffrey
      A. Rein
            
            
            877,024,245
            
            
            
            22,007,110Nancy
      M. Schlichting
            
            
            882,630,621
            
            
            
            16,400,734David
      Y. Schwartz
            
            
            882,712,259
            
            
            
            16,319,096Alejandro
      Silva
            
            
            882,552,109
            
            
            
            16,479,246James
      A. Skinner
            
            
            878,577,686
            
            
            
            20,453,669Marilou
      M. von Ferstel
            
            
            880,289,196
            
            
            
            18,742,159Charles
      R. Walgreen III
            
            
            881,171,103
            
            
            
            17,860,252






(2)
      The proposal to ratify the appointment of Deloitte & Touche as the
      company's independent registered public accounting firm was approved by a
      vote of 886,759,866 for, 4,687,290 against and 7,584,198
      abstentions.(3)
      The shareholder proposal regarding reports disclosing charitable
      contributions was not approved.  There were 49,661,951 votes
      for, 557,634,260 votes against, 79,182,591 abstentions and 212,552,552
      broker non-votes.(4)
      The shareholder proposal regarding a shareholder vote on the adoption,
      maintenance or extension of any poison pill was not
      approved.  There were 220,965,276 votes for, 452,571,816 votes
      against, 12,913,101 abstentions and 212,581,161 broker
      non-votes.(5)
      The shareholder proposal that the Chairman of the Board be an independent
      director who has not previously served as an executive officer of Walgreen
      Co. was not approved.  There were 238,042,573 votes for,
      435,726,666 votes against, 12,597,511 abstentions and 212,664,604 broker
      non-votes.


-18-


Item 6. EXHIBITS





(a)
            Exhibits





3.
            (a)
            Articles
      of Incorporation of the company, as amended, filed with the Securities and
      Exchange Commission as Exhibit 3(a) to the company's Quarterly Report on
      Form 10-Q for the quarter ended February 28, 1999, and incorporated by
      reference herein.(b)
            By-Laws
      of the company, as amended and restated effective as of October 7, 2007,
      filed with the Securities and Exchange Commission as Exhibit 3(b) to the
      company's Current Report on Form 8-K dated October 15, 2007, and
      incorporated by reference herein.31.1
            Certification
      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.31.2
            Certification
      of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32.1
            Certification
      of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002,18
      U.S.C. Section 1350.32.2
            Certification
      of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002,18
      U.S.C. Section 1350.





-19-


SIGNATURES











Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

















WALGREEN CO.(Registrant)Dated: 
      April 1, 2008
            /s/ W.M. RudolphsenW.M.
      RudolphsenSenior
      Vice President(Chief
      Financial Officer)Dated: 
      April 1, 2008
            /s/ M.M. ScholzM.M.
      ScholzController(Chief
      Accounting Officer)