Walgreens saw comparable-store sales drop by double digits in September as the drug chain reported sharp declines in prescription count and pharmacy revenue, which took a hit from introductions of lower-priced generic drugs.

Meanwhile, the drug chain reported strong enrollment numbers for its new Balance Rewards customer loyalty program just two weeks after its launch.

DEERFIELD, Ill. — Walgreen Co. saw comparable-store sales drop by double digits in September as the drug chain reported sharp declines in prescription count and pharmacy revenue, which took a hit from introductions of lower-priced generic drugs.

Walgreens said Wednesday that same-store sales fell 11.1%, reflecting negative impacts of 2.2 percentage points from calendar day shifts and 5.3 percentage points from new generic medications.

The September comparable-store result was down from decreases of 8.2% in August and 7% in July, which had improved from a 10% decline in June.

In the front end, comp-store sales dipped 1.5% in September. Customer traffic in comparable stores was down 2.3%, and basket size grew 0.8%.

Walgreens noted that customer registrations for its new Balance Rewards loyalty program, which was launched on Sept. 16, totaled nearly 13 million in September.

Pharmacy same-store sales dropped 16.1% for September. Walgreens said comparable-pharmacy sales were negatively impacted by 3.5 percentage points from calendar day shifts and by 8.4 percentage points from generic drug introductions.

Prescriptions filled at comparable stores fell 10.3% in September and by a day-fall adjusted (DFA) 6.8 percent, according to Walgreens. The chain said script count was negatively impacted by 3.5 percentage points from calendar day shifts and by 0.4 percentage point from fewer flu shots versus a year earlier. Meanwhile, prescription count at comparable stores got a lift of 0.1 percentage point from a higher incidence of flu during the month.

Flu shots administered at pharmacies and clinics season-to-date came in at nearly 1.5 million, down from about 1.8 million last year, Walgreens reported.

"The pharmacy comp‐store sales decline of 16.1% was well below the consensus
expectation for a 10.6% decline," William Blair & Co. analyst Mark Miller wrote in a research note released Wednesday. "The underlying pharmacy comp was much better. Adjusted same‐store scripts (same calendar, excluding flu impacts) improved sequentially in September on a one- and two-year basis. Over the past four months, adjusted same‐store scripts have steadily improved: June (down 9.3%), July (down 7.7%), August (down 7.0%), and September (down 6.5%). Excluding the impact of the Express Scripts’ contract impasse, we estimate Walgreens adjusted same-store script growth was above 4% in September."

Overall in September, Walgreens’ sales declined 7.8% to $5.48 billion from $5.94 billion a year earlier. Revenue was down 0.4% in the front end and 12.3% in the pharmacy. Walgreens said pharmacy sales accounted for 63.7% of total sales for the month. 

For the calendar year to date, sales were down 3.8% to $51.96 billion from $53.99 billion in the prior-year period. Walgreens’ fiscal year began Sept. 1, so fiscal year-to-date sales are the same as September sales.

Walgreens opened 15 stores in September, including two relocations. As of Sept. 30 excluding its acquisition of USA Drug, Walgreens operated 7,944 drug stores, 167 more than a year ago.

Miller said in his analysis that Walgreens won back a chunk of prescription business lost during its contract dispute with Express Scripts, which ended with a new contract going into effect Sept. 15.

"Since management has elected not to disclose the recapture rate of Express Scripts [customers], we can only estimate the impact. Our best guess is that Walgreens recaptured 10% to 20% of the customers in the last two weeks of September," he explained in his report. "The low end of that projection assumes a full-month lift of 1% to scripts (0.5% from two weeks), and the high end is 2.5% (comparing September with July). In either case, we remain comfortable with our assumption that Walgreens can recapture one-third of lost prescriptions in fiscal 2013. The recapture rate likely will accelerate in January (with employer communications regarding pharmacy network access) and as the effectiveness of competitor actions (e.g. automatic refills) dissipate somewhat."