Impacted by calendar day shifts, same-store sales at Walgreen Co. decreased for the second straight month in January.

Walgreens, same-store sales, January, comparable-store sales, pharmacy, front end, drug store, Mark Miller, William Blair & Co., Russell Redman

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No same-store sales rebound at Walgreens

February 3rd, 2010

DEERFIELD, Ill. – Impacted by calendar day shifts, same-store sales at Walgreen Co. decreased for the second straight month in January.

Though overall sales were up, the drug store chain said Wednesday that comparable-store sales fell 1.1% year over year in January, which also is down from a 0.3% decline for December. The retailer has seen a downward trend in same-store sales growth since the fall but had reported increases until December.

Walgreens said the calendar day shifts had a negative effect of 1.3 percentage points on comp-store sales in January, which had one less Thursday and one more Sunday versus a year earlier.

Same-store sales dipped 1% in the front end and were down 1.2% in the pharmacy. The retailer said the pharmacy decrease reflected the negative impact of calendar day shifts (by 1.9 percentage points), generic drug introductions in the last 12 months (by 2.3 percentage points) and a lower incidence of flu compared with January 2009.

Meanwhile, prescriptions filled at comparable stores rose 2.7% in January, including 1.7 percentage points from H1N1 flu shots and 1.4 percentage points from more patients filling 90-day prescriptions, according to Walgreens. Calendar day shifts negatively impacted prescriptions filled in comparable stores by 1.9 percentage points.

"The pharmacy comp sales decline of 1.2% was below our estimate for a 1.8% increase and the [Wall] Street projection for 2.4% growth," William Blair & Co. analyst Mark Miller said in a research note on Walgreens' January results. "Excluding the adverse calendar shift, pharmacy comps rose 0.7%, which was 200 basis points weaker than the November/December trend. Management indicates that lower flu-related prescriptions subtracted 110 basis points from the comps in January (versus 60 basis points in December), which explains about one-fourth of the slower trend.

"Walgreens' 0.7% same-calendar pharmacy comp increase in January is the weakest in the past 15 years (since the company has reported interim segment data) and perhaps ever in the history of the company," he wrote in the report. "Undoubtedly, there is some correlation with high unemployment, and we believe pharmacy trends likely will remain soft for some time as more people lose unemployment benefits during 2010."

Miller also noted that Walgreens' front-end same-store sales decline of 1.2% was below William Blair & Co.'s forecast for a 1% gain and analysts' consensus projection for a 0.4% increase. "Management indicates that traffic declined 0.8% and the average ticket was
down 0.2%," he added.

Still, Walgreens' total sales for January came in at $5.36 billion, up 2.7% from $5.22 billion in the prior-year period. Front-end sales climbed 3.9% year over year for the month, while pharmacy sales edged up 1.6%.

For the fiscal 2010 year to date, revenue for the first five months totaled $28.1 billion, a 6.8% gain from $26.3 billion a year earlier.

Walgreens said it opened 18 stores during January, including four relocations, and closed one store. As of Jan. 31, the chain operated 7,162 drugstores, 503 more than a year ago, including 51 stores acquired over the last 12 months.

*Editor's Note: Analyst comment updated on Feb. 3.