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Drug chains end year with a bang

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NEW YORK — A stellar December capped a strong year for chain drug retailers.

Industry sales for chain drug stores advanced 5.8% in 2014, with same-store dollar volume climbing 4.6%. Both numbers were up by more than a full point from 2013, when total volume advanced 4.4% and comparable-store sales rose 3.1%.

Walgreen Co. shined in December, as it posted a 10.2% increase in sales to $7.92 billion along with a 9.2% same-store sales advance. Rite Aid Corp.’s same-store sales for the month climbed 5.3%, and the chain’s total volume increased 4.9% to $2.21 billion.

The industry’s results reflect a strong national economy, driven by job growth, falling gas prices, rising stock prices and peaking consumer confidence.

Optimism among shoppers has been fostered by “a considerably more favorable assessment of current economic and labor market conditions,” said Lynn Franco, director of economic indicators at The Conference Board. As a result, the board’s Consumer Confidence Index is at its highest level since February 2008.

While shoppers were moderately less optimistic about the short-term outlook in December, “they are more confident at year-end than they were at the beginning of the year,” she added.

The Commerce Department reported that consumer spending helped boost the economy by 5% in the third quarter, well above the agency’s earlier 3.9% estimate.

The growth was “very consistent with a U.S. consumer that is doing quite well,” Michael Gapen, chief U.S. economist at Barclays, told The New York Times. “Consumers are receiving a boost in the form of lower gas prices, but they are also feeling more confident about their own futures because of the stronger labor market.”

Jan Hatzius, chief economist of global investment research at Goldman Sachs, said, “We think that the economy is actually still quite far away from full employment, despite the fact that the unemployment rate has now fallen below 6%.”

But there is a cloud on the economic horizon in the form of overseas woes that have the potential to drag down the U.S.

While falling petroleum prices mean more dollars in American consumers’ pockets, they are expected to dampen growth in oil-producing regions from Latin America to Russia. Political instability hangs over areas from Eastern Europe to the Middle East, and the Eurozone’s economy remains soft with some members, like Italy, descending into a third recession since the financial crisis.

China, long viewed as a global growth engine, has been hit by real estate price drops, soft domestic demand and reduced industrial production. The country’s economy grew 7.3% in the third quarter, but that was its slowest rate in five years. Japan has had two quarters of contraction, signaling another recession.


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