) recently reported results for the month of Jun 2013. The
company posted the fourth consecutive month of sales growth with
2.5% year over year increase to $5.64 billion.
Total front-end sales increased 2.2% compared with the year-ago
period, while comparable store front-end sales improved 0.8%.
Customer traffic in comparable stores was down 2.9% whereas,
basket size increased 3.7% year over year.
Prescriptions filled at comparable stores at Walgreens improved
5.0% (or 7.3% on a calendar day-shift adjusted basis) on the
heels of increasing return of
Express Scripts Holding Company
) customers. Alongside, flu shots had a positive impact of 0.1%
in the month. According to the company, calendar shifts adversely
affected prescriptions filled at its comparable stores by 2.3% as
Jun 2013 had one additional Sunday and one lesser Friday compared
with the prior-year month.
Total sales in comparable stores inched up 2.3% on a
year-over-year basis. However, the generic wave in the
pharmaceutical industry during the last 12 months led to an
adverse impact of 1.8% on comparable store sales. Further, the
calendar day shifts dragged comparable store sales by 1.5%. Flu
shots had no impact on comparable store sales in the reported
Walgreens' total pharmacy sales which accounted for the lion's
share (64.3%) of total sales in the reported month, improved 2.9%
(or 5.6% on a calendar day-shift adjusted basis) year over year.
Calendar day shifts had an adverse effect of 2.3% on pharmacy
sales. On a calendar day shift adjusted basis, the generic wave
in the pharmaceutical industry dragged comparable store pharmacy
sales by 2.8% in June.
Year-to-date, Walgreens' Balance Rewards loyalty program
(launched in Sep 2012) has recorded over 75 million
registrations. The company opened 10 stores (including 4
relocations) and closed 4 stores during the month.
As of Jun 30, 2013, Walgreens operated 8,563 locations in 50
states, the District of Columbia, Puerto Rico and Guam, including
8,098 drugstores (191 more compared with the year-ago period).
The company also operates infusion and respiratory service
facilities, specialty pharmacies and mail service facilities.
As expected, Walgreens recorded plump sales with increasing
return of Express Scripts customers following the resolution of
the earlier impasse between the two companies. However, the
generic wave in the pharmaceutical industry continues to hurt
revenues. Nonetheless, Walgreens stands to generate higher
profitability from escalating sales of the higher-margin generic
Last month, the company reported a disappointing third quarter as
it missed the Zacks Consensus Estimate on both lines. While
revenue witnessed slight growth, earnings growth of over 18%
failed to meet our expectations.
The declining customer traffic despite a solid foothold across
the U.S. and weaker-than-expected front-end sales are cause of
concern. Unyielding macroeconomic conditions also remain an
However, we look forward to the forthcoming quarters as the
company strides on the synergy track with its Alliance Boots
partnership and the long-term deal with
) comes into effect in Sep 2013. We believe that the upcoming
quarterly numbers will reflect whether Walgreens' deal-making
spree is paying off.
Currently, the stock carries a Zacks Rank #3 (Hold). On the other
) carrying a Zacks Rank #1 (Strong Buy) warrants a look.
AmerisourceBergen is also worth considering as it holds a Zacks
Rank #2 (Buy).
AMERISOURCEBRGN (ABC): Free Stock Analysis
EXPRESS SCRIPTS (ESRX): Free Stock Analysis
HERBALIFE LTD (HLF): Free Stock Analysis
WALGREEN CO (WAG): Free Stock Analysis Report
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