Surging front-end sales again helped lift monthly same-store sales at Walgreen Co., which in March continued a rising trend that began in the fall.


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Walgreens continues same-store sales gains

April 5th, 2011

DEERFIELD, Ill. – Surging front-end sales again helped lift monthly same-store sales at Walgreen Co., which in March continued a rising trend that began in the fall.

Walgreens on Tuesday said comparable-store sales (excluding Duane Reade) climbed 3% in March, virtually matching the 3.1% same-store increase in February. The drug store chain had turned in a strong 6.1% comparable-store gain in January that extended an upward trend including increases of 2.8% in December and 3.2% in November following a 1.3% decline in October.

Despite the negative impact of this year's later Easter, which falls on April 24 versus April 4 last year, front-end same-store sales rose 1.6% in March, according to Walgreens. Customer traffic in comparable stores and basket size both edged up 0.8%.

Comparable-pharmacy sales were up 3.7%, reflecting a negative impact of 2.3 percentage points from generic drug introductions in the last 12 months, the company said. Meanwhile, prescriptions filled at comparable stores increased 3.5% in March, in spite of a 0.9 percentage point negative impact from calendar day shifts.

Overall sales in March advanced 7.6% year over year to $6.28 billion from $5.83 billion. Walgreens said Duane Reade stores contributed 2.8 percentage points to the total revenue increase for the month.

Total front-end sales gained 8.4% in March, including 4.7 percentage points from Duane Reade stores, while pharmacy revenue was up 7.3% during the month.

William Blair & Co. analyst Mark Miller said Walgreens' 3% same-store sales increase in March topped his firm's 2.3% forecast as well as the 1.8% consensus estimate among industry analysts.

"All of the comp upside occurred within the front end, as Walgreens' same-store front-end sales rose 1.6%, above our [forecast] and the consensus estimate for roughly flat comps," Miller wrote in a research note released Tuesday. "On a two-year stacked basis, March's front-end comp of 3.8% accelerated from February's 3.2%, despite the detrimental calendar shift. Adjusting for the adverse Easter shift — which we estimate at 300 to 400 basis points — March's underlying front-end comp increased roughly 5%."

Miller said the introduction of beer and wine added 75 basis points to Walgreens' front-end same-store sales in March. He added that vitamins were "a solid performer in March" for the chain, while photo remained the retailer's weakest-performing department.

"Pharmacy comps rose 3.7%, in line with our 3.5% forecast but ahead of the 2.6% consensus," he stated. "Adding back 90 basis points for an adverse calendar shift, Walgreens' pharmacy comps increased 4.6%, slightly above the prior three-month trend."

Walgreens reported that for the calendar year to date through March, its sales came in at $17.98 billion, up 9.1% versus a year earlier. Fiscal 2011 year-to-date revenue, covering seven months, gained 7.5% to $42.12 billion.

During March, Walgreens opened 12 stores, including three relocations, and acquired one store and closed two. As of March 31, the retailer operated 7,697 drug stores, 472 more than a year ago, including 285 stores acquired over the past year.

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