Key Walgreen revenue figure falls 11.1 pct in Sept.
ASSOCIATED PRESS October 3, 2012 9:32AM
Updated: October 3, 2012 1:41PM
Walgreen Co.’s revenue from established stores fell more than analysts expected in September, as generic drugs and fewer weekdays hurt the drugstore chain’s performance compared to last year.
The Deerfield-based company said Wednesday the introduction of generic drugs over the past 12 months accounted for more than half of the 16.1 percent drop it saw last month in pharmacy revenue from stores open at least a year.
The introduction of generic equivalents to popular brand-name drugs like the cholesterol fighter Lipitor has hurt revenue for Walgreen and other drugstore chains because the generics cost less than their brand-name counterparts. At the same time, however, they boost profitability because they come with a wider margin between the cost for the pharmacy to purchase the drugs and the reimbursement it receives.
Walgreen also said September sales were hurt because the month had one additional Saturday and Sunday and one fewer Thursday and Friday compared to September, 2011. Drugstores generally see more sales on work week days, when their customers are more likely to seek medical care and then fill a prescription.
Overall, the nation’s largest drugstore chain said revenue from stores open at least a year sank 11.1 percent last month. Revenue from the front end, or rest of the store, slid 1.5 percent.
Revenue from stores open at least a year is considered a key indicator of retailer health because it leaves out results from locations that have opened or closed in the last year.
Analysts expected, on average, an overall drop of 7.3 percent in revenue from stores open at least a year, according to Thomson Reuters. That included an 11.4 percent drop in pharmacy revenue and a slight front-end decrease.
Walgreen runs 7,944 drugstores in all 50 states, the District of Columbia, Puerto Rico and Guam, or more than its main competitors CVS Caremark Corp. and Rite Aid Corp.
Its overall revenue totaled $5.48 billion in September, a 7.8 percent drop from a year ago. Pharmacy revenue accounted for nearly 64 percent of this September’s total.
Walgreen revenue also has slumped this year due to a contract dispute with Express Scripts Holding Co., which runs prescription drug plans for employers, insurers and other clients as the nation’s largest pharmacy benefits manager. The companies let an agreement between them expire at the end of the year, and their new deal didn’t start until Sept. 15.
The nine-month split sent Walgreen customers to its competitors to get their prescriptions filled.
Credit Suisse analyst Edward J. Kelly said in a research note he believes Walgreen has recaptured only 5 percent to 10 percent of the prescriptions it lost during the contract dispute, but he also noted that the new agreement just started a few weeks ago. Overall, Kelly said Walgreen’s performance disappointing.
Walgreen had noted the impact from this split in previous monthly sales reports, but the drugstore chain never mentioned Express Scripts in the report it released Wednesday. A company spokesman declined to comment on whether the split affected Walgreen’s September performance.
Company shares fell 61 cents, or 1.6 percent, to $36.30 in morning trading Wednesday. They had risen to a 52-week high of $37.35 in Tuesday’s trading. They traded as low as $28.53 in mid-June.