A strong finish helped the chain drug industry post solid sales for 2010.

drug chains, sales, chain drug industry, same-store sales, drug store, pharmacy, economic recovery, comparable-store sales, front end, Rite Aid, Walgreens, John Standley, Discount Drug Mart, Tom McConnell, Pharmaca, Mark Panzer, pharmacy sales, front end sales, prescriptions filled, Deutsche Bank Securities, Bill Dreher, Geoff Walden

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Despite bad climate, drug chains grow sales

January 17th, 2011

NEW YORK – A strong finish helped the chain drug industry post solid sales for 2010.

Industry sales volume advanced 5.4% for the year to $238.3 billion, with same-store sales climbing 2.6%, according to research by Racher Press, the publisher of Chain Drug Review. And drug chains closed 2010 with a flourish, posting a nearly 6% sales gain in December and a 3.5% same-store sales increase.

Still, drug store chains are wary of a dramatic turnaround, given the conservatism accompanying the sluggish economic recovery.

High joblessness and “the disastrous economic climate” of the past two years have likely caused a “permanent shift in consumer behavior,” said John Standley, president and chief executive officer of Rite Aid Corp., which last month posted its first same-store sales gain since May 2009. Shoppers will continue to seek bargains, even when the economy picks up, he said, adding “the more pragmatic, hard-choice mind-set is here to stay.”

The new year is looking a lot like the old year, according to Discount Drug Mart chief financial officer and senior vice president of finance Tom McConnell. From a retail perspective, it’s a time “to hunker down and get a small increase in sales,” he said. “It will be about controlling costs and maintaining margins.”

Pharmaca Integrative Pharmacy president and chief executive Mark Panzer said that although consumers have relaxed their grip on their wallets “ever so slightly,” shoppers will continue to be price-conscious, “seeking out the best deals to support their basic needs and forgoing most impulse purchases.”

The front end could be a sales driver, considering that consumers see many H&BAs as essential items and turn to drug stores for low prices.

Last month front-end business helped Walgreen Co. sustain its same-store momentum. Walgreens’ comparable-store sales (excluding Duane Reade) in December rose 2.8%, which along with a 3.2% gain in November continued a turnaround from a 1.3% decline in October.

Walgreens’ same-store front-end sales climbed 3.6% in December — the highest increase in 14 months. Customer traffic in comparable stores edged up 0.9%, and basket size grew 2.7%. December same-store pharmacy sales moved up 2.2%. Prescriptions filled at comparable stores rose 2.9%.

Rite Aid, meanwhile, saw its monthly same-store sales rise for the first time in 19 months.

For the four weeks that ended Christmas Day, Rite Aid’s comparable-store sales edged up 0.6% versus declines of 1.3% in November and 1.7% in October. The retailer’s last reported same-store sales gain was in May 2009, also a 0.6% uptick.

December same-store sales rose 0.1% in the front end and 1% in the pharmacy. In addition, prescriptions filled at comparable stores advanced 0.9% .

Rite Aid’s monthly sales were an “encouraging result in light of management’s fourth-quarter guidance reduction on slower sales expectations,” Deutsche Bank Securities analyst Bill Dreher wrote in a research note.