Pointing to a modest flu season and less seasonal business, Walgreen Co. posted a 0.3% decline in same-store sales for December.


Walgreens, same-store sales, December, pharmacy, front-end, December sales, flu, seasonal merchandise, Greg Wasson, William Blair & Co., Mark Miller, Russell Redman












































































































































































































































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Same-store sales dip in December at Walgreens

January 6th, 2010

DEERFIELD, Ill. – Pointing to a modest flu season and less seasonal business, Walgreen Co. posted a 0.3% decline in same-store sales for December.

The decrease continued a deceleration in same-store revenue growth from the fall, with the drug store chain reporting gains of 3.9% in November, 4.9% in October and 5.3% in September.

In December, comparable pharmacy sales rose 1.8%, down from 5.7% in November. Walgreens said Wednesday that comparable pharmacy sales were negatively impacted by 2.1 percentage points due to generic drug introductions in the last 12 months.

Prescriptions filled at comparable stores increased 4.1% in December, and comparable prescriptions filled were positively impacted by 1.1 percentage points because of more patients filling 90-day prescriptions, the retailer noted.

In the front end, comparable-store sales fell 3.1%, according to Walgreens. The company said the falloff stemmed mainly from its decision to scale back seasonal inventory purchases in 2009 versus 2008 as well as from a lower incidence of flu compared with December 2008.

"In December 2008, we significantly discounted seasonal merchandise after buying substantial inventory in anticipation of a strong holiday season. This year, we took a more cautious buying approach and invested 28% fewer dollars in seasonal items for comparable stores," Walgreens president and chief executive officer Greg Wasson said in a statement.

"This significantly impacted holiday clearance sales, but it also positioned us to enter the new year in a better inventory position and with better gross margins compared with a year ago," Wasson explained.

Meanwhile, total December sales climbed 3.6% to $6.3 billion from $6.1 billion a year earlier. Sales were up 4.8% in the pharmacy and 1.5% in the front end.

Walgreens reported, however, that customer traffic in comparable stores was down 0.8%  in December and that the average sales per transaction fell 2.3% in comparable stores.

The impact of calendar day shifts had a negative effect on December, which had one less Monday and one more Thursday compared with December 2008, the company noted. Calendar shifts negatively impacted total comparable-store sales by 0.4 percentage points, comparable pharmacy sales by 0.6 percentage points and prescriptions filled in comparable stores by 0.6 percentage points.

"The front-end comp sales decline of 3.1% was below our estimate for a 0.5% gain and the consensus projection for a 0.8% increase," William Blair & Co. analyst Mark Miller said in a research note on Walgreens' December sales. "Part of the shortfall is attributable to a larger-than-expected decline in the seasonal business, as it was not clear the degree to which Walgreens reduced merchandise in this category: down 28% per store year to year."

"Management indicates that comp-store sales for seasonal categories declined by 15% to 20%," Miller wrote in the report. "Assuming seasonal is roughly 10% of the December front-end mix, we estimate the sales decline constituted roughly half (1.5% to 2.0%) of the overall 3.1% front-end comp decline. Stronger-performing front-end categories included food, beauty and photo."

Walgreens said calendar-year 2009 sales came in at $65 billion, up 7.3% from $60.6 billion in 2008. Fiscal 2010 year-to-date sales for the first four months totaled $22.7 billion, a gain of 7.8% from $21.1 billion in the prior-year period.

During December, Walgreens opened four stores and closed two. As of December 31, the retailer operated 7,149 drug stores, 513 more than a year ago, including 55 stores acquired over the last 12 months.

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