) recently disclosed exhaustive results for the month of Mar
2013. The company improved its monthly sales after a
disappointing February as March sales inched up 2.3% year over
year to $6.16 billion.
CVS CAREMARK CP (CVS): Free Stock Analysis
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Total front-end sales improved 5.4% compared with the year-ago
period, while comparable store front-end sales increased 4.2%.
Customer traffic in comparable stores was down 1.3% although
basket size increased 5.5% year over year. These numbers are a
stark contrast from the Feb 2013 lean sales results. Investors
viewed the results in positive light as the stock reached a new
52-week high of $48.18 on the day of the results.
Prescriptions filled at Walgreens' comparable stores increased 4%
in the reported month on the heels of return of
) customers to pharmacies. The calendar shifts of an additional
Sunday and one less Thursday led to an adverse impact of 3.4
percentage points despite the inclusion of Easter holiday (Mar
31) in the month. After accounting for these calendar shifts,
prescriptions filled shot up 7.4%.
Total sales in comparable stores rose 0.7% on a year-over-year
basis. A decline of 3.0 percentage points was attributable to
generic introduction in the pharmaceutical industry during the
last 12 months while calendar day shifts hampered comparable
store sales by 2.1 percentage points.
Walgreens' total pharmacy sales which accounted for the lion's
share (62.2%) of total sales in the reported month improved 0.4%
year over year. However, comparable store pharmacy sales declined
1.5% due to the adverse impact of 3.4 percentage points from
calendar shifts. The generic wave in the pharmaceutical industry
had a negative impact of 4.8 percentage points on calendar
day-shift adjusted comparable store pharmacy sales. Adjusting for
calendar shifts, comparable store pharmacy sales increased 1.9%.
To date, Walgreens' Balance Rewards loyalty program (launched in
Sep 2012) has recorded over 64 million registrations. The company
opened 12 stores (including 4 relocations) and closed one during
As of Mar 31, 2013, Walgreens operated 8,541 locations in all 50
states, the District of Columbia, Puerto Rico and Guam, including
8,077 drugstores (230 more compared with the year-ago period with
101 net stores acquired during the last 12 months). The company
also operates infusion and respiratory service facilities,
specialty pharmacies and mail service facilities.
After it crossed the halfway mark for fiscal 2013, things began
to look up for Walgreens. As expected, the company recorded plump
sales with increasing return of Express Scripts customers
following the resolution of the earlier impasse between the two
companies. Meanwhile, Walgreens strategy of reviving growth of
its front-end stores paid off. This should also help the company
to improve sales results for the ongoing quarter.
On the tepid side, pharmacy business continues to slow down as
the generic wave continues to hurt franchise revenues. We also
believe that industry conditions and market share tussle with
) is not likely to wane in the near-term for Walgreens.
As a result, the stock carries a Zacks Rank #3 (Hold). While we
have a neutral stance on Walgreens, drug retailer
Rite Aid Corporation
), carrying a Zacks Rank #1 (Strong Buy) warrants a look. CVS
Caremark is also worth considering as it carries a Zacks Rank #2