) reported its monthly sales figures for May with total revenues
higher by 4.3% to $6.22 billion. With this, the total Q3 2013
revenue for the company now stands at $18.34 billion, up 3.3% over
the same period last year.
Based on similar lines as the "Boots Advantage Card" loyalty
program administered by Alliance Boots, which enables customers to
earn points on purchases for redemption later - Walgreen's Balance
Rewards loyalty program has played an instrumental role in
achieving sales growth, as consumers made repeat purchases in order
to accumulate points on their card. The program had as many as 72
million registrations as on May 31 - a big number considering the
program was launched just last September.
View our complete analysis for Walgreen
May Revenue Figures Rise As Customers Return After
Express Scripts Dispute
The total front-end sales grew by 3.4% year-on-year supported by
additional stores opened by Walgreen during the year. In May
itself, Walgreen added 10 additional stores to take its total store
count to 8,560. On a comparable store basis, front-end sales
increased by 1.2% as an increase in average basket size of 4.7% was
partly offset by a 3.5% decrease in traffic.
The number of prescriptions filled at comparable stores
increased substantially by 7.1% in May as customers continued
shifting back to Walgreen after a brief hiatus due to the dispute
with Express Scripts last year. The easy availability of drugs and
convenience of Walgreen store locations are significant factors
behind these returning consumers. Walgreen's easy accessibility is
further enhanced by the convenience of filling prescriptions using
its interactive mobile application and Internet websites.
Pharmacy sales accounts for over 63% of the total store sales at
Walgreen. On a comparable store basis, pharmacy sales grew by 3.8%
year-on-year. Higher generic dispensing rate had a 3.7% negative
impact on the comparable store pharmacy sales. Although generics
have a negative impact on the top line, they provide the
much-needed boost to bottom line, as they generally have higher
margins than their branded counterparts do.
AmerisourceBergen To Start Distribution In
Walgreen inked a
10-year contract with AmerisourceBergen
earlier this year to source its drugs jointly and to use
AmerisourceBergen's logistics for efficient distribution of drugs
to Walgreen's stores. The contract commences in August this year,
and we will be closely watching the developments. Walgreen also got
the approval for buying an equity stake in AmerisourceBergen, 7%
immediately and two tranches of 8% each in 2016 and 2017, making a
total of 23%.
Walgreen, jointly with Alliance Boots, currently sources about
$7 billion worth of generics every year. This new agreement with
AmerisourceBergen will add another $3.5 billion worth of generics
to the common buying pool, possibly generating scale efficiencies.
The company estimates the total synergies to be worth 100-150
million this year, slowly moving up to reach $1 billion by
Trefis price estimate for Walgreen stands at $42, which is at a
13% discount to the current market price.
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