In its concerted effort to meet the rising demand for vaccines
in the ongoing flu season,
) supplied its U.S. pharmacies with an additional 200,000 doses
of flu vaccines. These can now be administered to customers on
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Based on the reported cases and data by Centers for Disease
Control (CDC), this has been the worst flu season in a decade
with 47 states recording widespread flu activity. According to
CDC, the spread of flu increased across the U.S. by Jan 11, 2013.
Considering that flu activity in the U.S. spikes usually in Jan
or Feb, Safeway's decision appears to be a rational and lucrative
opportunity to garner incremental revenues.
As per management, the shipment was necessary to meet the demand
for flu vaccine stocks at one of the largest food and drug
retailers in North America. Moreover, to stimulate demand and
encourage consumers to take flu vaccines, Safeway is offering a
10% discount coupon on the next grocery purchase to every
customer who receives a flu vaccine at Safeway Pharmacy.
Other players providing flu shots such as
) also stand to gain from this grueling flu season. Management at
Walgreens asserts that the ongoing severe flu season should
spread awareness and support customer win back after its seven
month impasse with
The acute rise in flu cases is a positive factor for these
companies as they battle macroeconomic headwinds. However, the
players need to maintain supply continuum to meet the surging
demand for flu shots.
Despite positive driving events, headwinds such as margin
pressure and a highly leveraged balance sheet are cause of
concern. Moreover, macroeconomic conditions remain unyielding. We
currently have a long-term Neutral recommendation on Safeway
which carries a Zacks Rank #3 (Hold). CVS Caremark carries a
Zacks Rank #2 (Buy).