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Full-year sales reflect drug chains’ resilience

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NEW YORK — Despite the lingering recession, the chain drug industry finished 2009 with solid gains in revenue.

Overall drug store chain sales for the year rose 7.4% to $226.11 billion, while same-store sales grew 3.4%, according to research by Racher Press, publisher of Chain Drug Review.

However, December was a different story as positive trends through Christmas tailed off in the last week of the month.

Total sales at Walgreen Co. rose 3.6% to $6.3 billion, but comparable-store sales decreased 0.3%, dragged down by front-end comparable-store results that fell 3.1%, offsetting a 1.8% gain in the pharmacy.

The drug chain attributed the front-end performance to its decision to take a cautious approach in buying seasonal merchandise, coupled with a lower incidence of flu than that a year ago.

President and chief executive officer Greg Wasson noted that the retailer invested 28% fewer dollars in seasonal items for its comparable stores, which negatively impacted holiday clearance sales but boosted gross margins and improved the year-end inventory position.

At Rite Aid Corp., December brought continued negative top-line trends, as total sales slipped 3% to $2.09 billion. Same-store sales fell 1.8%, reflecting decreases of 1.5% in the pharmacy and 2.3% in the front end.

“We believe that the deceleration in the cold and flu season, after an early and aggressive start, likely contributed to the weaker-than-expected pharmacy results,” Deutsche Bank Securities analyst Bill Dreher wrote in a research note. “In addition, Rite Aid faces dramatically tougher competition from CVS and Walgreens in one of their most productive regions, the West Coast.”

One factor behind the sector’s disappointing front-end results is suggested by some additional Walgreens numbers: Its average transaction fell 2.3%, and customer traffic dipped 0.8%.


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