) recently reported results for the month of Feb 2014. The
company posted 5.0% year-over-year sales growth to reach $6.05
billion in the month.
Total front-end sales increased 3.0% from the year-ago period,
with 2.0% improvement in comparable store front-end sales.
Customer traffic in comparable stores edged down 0.7% whereas
basket size increased 2.7% year over year.
Prescriptions filled at comparable stores at Walgreens were up
2.2%. Walgreens experienced a negative impact of 1.0% on
prescriptions filled at comparable stores owing to lower
incidence of flu in February. However, year-over-year improvement
in flu shots led to a nominal 0.1% positive impact on
prescriptions filled at comparable stores.
Total sales in comparable stores rose 4.5% on a year-over-year
basis. The generic wave in the pharmaceutical industry during the
last 12 months led to an adverse impact of 0.9% on comparable
store sales while lower incidence of flu negatively impacted
total comparable sales by 0.4%.
Walgreens' total pharmacy sales, which accounted for the
lion's share (62.9%) of total sales in the reported month,
improved 6.7% year over year. The generic wave in the
pharmaceutical industry dragged comparable store pharmacy sales
by 1.4% in February. More flu shots in this month led to an
increase of 0.1% in comparable store pharmacy sales. However,
lower incidence of flu negatively impacted pharmacy sales by
The company opened 8 stores (including 5 relocations) during
the reported month.
With this, the company ended its second quarter of fiscal
2014. In this quarter, although the company recorded an
improvement of 5.2% year over year in total sales to $18.65
billion, it missed the Zacks Consensus Estimate of $19.54
billion. According to Walgreens, in the second quarter,
comparable store sales increased 4.5% with 2.0% increase in
front-end comparable store sales. Prescriptions filled at
comparable stores increased 2.4% and comparable pharmacy sales
Moreover, comparable store front-end sales and prescriptions
filled at comparable stores in the second quarter were negatively
impacted by 0.6% and 0.8%, respectively, due to adverse weather
conditions this winter. Notably, Walgreen is slated to release
its second quarter and fiscal 2014 results (ending Feb 2014) on
Mar 25, 2014, before the market opens.
As of Feb 28, 2014, Walgreens operates 8,681 locations in 50
U.S. states, the District of Columbia, Puerto Rico, Guam and the
U.S. Virgin Islands, including 8,209 drugstores (138 more than
the year-ago period). This includes 60 net stores acquired over
the last year. The company also operates infusion and respiratory
service facilities, specialty pharmacies, mail service facilities
and Take Care Health Systems subsidiary.
Walgreens reported another month of year-over-year improvement
in sales. The generic wave in the pharmaceutical industry is
still a threat to revenues. This is also reflected in the
company's quarterly sales figure which fell short of the Zacks
Nonetheless, Walgreens is poised to generate higher profits
from escalating sales of higher-margin generic drugs. The company
is also positioned on a healthy dividend growth track. Further,
the customer loyalty program is gaining traction as reflected in
increasing registrations. This should improve customer traffic
for Walgreens going forward.
We also look forward to synergies from the Alliance Boots
deal. Earlier, the company estimated that accretion from Alliance
Boots in the second quarter of fiscal 2014 will be an adjusted 7
to 8 cents per share.
The deal with
Amerisource Bergen Corporation
) - likely to create a leader in the generic and branded drug
purchasing space- is another major upside. Walgreens is
optimistic about financial and operational benefits from the deal
for fiscal 2014, with margin expansion and bottom-line accretion.
Evidently, management seems to have chalked out a number of
strategic initiatives to revive growth at the company.
Currently, the stock carries a Zacks Rank #3 (Hold).
Better-placed stocks that are worth a look include
Rite Aid Corporation
). Both the stocks carry a Zacks Rank #2 (Buy).
AMERISOURCEBRGN (ABC): Free Stock Analysis
HERBALIFE LTD (HLF): Free Stock Analysis
RITE AID CORP (RAD): Free Stock Analysis
WALGREEN CO (WAG): Free Stock Analysis Report
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