Same-store sales at Walgreen Co. dipped in October despite revenue gains in both the pharmacy and front end.

Walgreens, same-store sales, October, comparable-store sales, pharmacy, front end, Duane Reade, comparable stores, prescriptions filled, drug store, Russell Redman

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Walgreens reports October same-store sales decline

November 3rd, 2010

DEERFIELD, Ill. – Same-store sales at Walgreen Co. dipped in October despite revenue gains in both the pharmacy and front end.

The drug store chain said Wednesday that comparable-store sales (excluding Duane Reade) in October fell 1.3% versus a year earlier but reflected a 1 percentage point negative impact from calendar day shifts. The result was down from a 0.4% same-store sales uptick in September and a 2.1% increase in August.

In the front end, comparable-store sales decreased 0.8% in October. Walgreens said customer traffic in comparable stores declined 1.4%, while basket size was up 0.6%.

"We view the front-end performance as solid, particularly as it was negatively affected by Halloween falling on a Sunday this year versus Saturday last year," William Blair & Co. analyst Mark Miller said in a research note on Walgreens' October sales results.

Same-store sales in the pharmacy decreased 1.6%, including negative impacts of 1.6 percentage points from calendar day shifts, 3 percentage points from generic drug introductions and 2.1 percentage points because of a lower incidence of cough, cold and flu, according to Walgreens. Comparable pharmacy sales were positively impacted by 0.4 percentage point due to more flu shot business, the company added.

"Pharmacy comps fell 1.6% on a reported basis but were flat on a calendar-adjusted basis and in line with our estimate," Miller wrote.

Prescriptions filled at comparable stores tailed off 0.2 percent in October, including 1.4 percentage points from more patients filling 90-day prescriptions. Calendar day shifts negatively impacted prescriptions filled in comparable stores by 1.6 percentage points, while the lower incidence of flu negatively impacted comparable prescriptions filled by 2.5 percentage points. Prescriptions filled at comparable stores were positively impacted by 0.5 percentage point due to more flu shots.

Flu shots administered at pharmacies and clinics during October totaled more than 2.2 million, with more than 4.5 million flu shots having been administered season-to-date, Walgreens reported.

"We have provided nearly as many seasonal flu shots this year as we did during all of last year's flu season, despite significantly less flu virus circulating across the country," Kermit Crawford, president of pharmacy services at Walgreens, said in a statement. "With ample supply of flu vaccine available and the typical peak of the flu season still several months away, now is the time for consumers to protect themselves, their families and their friends against the flu before the busy holiday season starts. And we've made it easier than ever to get immunized by offering flu shots at every Walgreens, every day with no appointment necessary."

Miller noted in his report that although flu shots added 40 basis points to Walgreens' pharmacy same-store sales growth in October, "the uplift was less than half what we expected, partly reflecting the adverse impact of warm temperatures in October. We project Walgreens will administer roughly 7 million flu shots in the November quarter, which may add an estimated 2 cents to earnings per share year to year."

Overall, Walgreens' October sales came in at $5.85 billion, up 3.7% from $5.64 billion a year earlier. The company said Duane Reade stores contributed 2.8 percentage points to the total sales increase. Pharmacy revenue rose 2.5% and front-end sales gained 6.3% in October, including 4.8 percentage points from Duane Reade.

Calendar year-to-date sales climbed 5.5% to $56.2 billion, according to Walgreens. Fiscal 2011 sales for the first two months were $11.5 billion, up 4.5% versus a year earlier.

During October, Walgreens opened 36 drug stores, including six relocations, and closed two stores. The retailer operated 7,608 drug stores as of Oct. 31, 503 more than a year ago, including 284 stores acquired in the last 12 months.

*Editor's Note: Analyst comment added on Nov. 4.