Walgreen Co. saw same-store sales growth decline for the third straight month in November as several negative factors impacted the pharmacy, including the drug chain's stand-off with pharmacy benefit manager Express Scripts Inc.


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Walgreens reports slim comp-store gain

December 5th, 2011

DEERFIELD, Ill. – Walgreen Co. saw same-store sales growth decline for the third straight month in November as several negative factors impacted the pharmacy, including the drug chain's stand-off with pharmacy benefit manager Express Scripts Inc.

Walgreens said Monday that, including a 0.3 percentage point negative impact from calendar day shifts, comparable-store sales in November edged up 1.8% from a year earlier. That continued a downward trend from gains of 2.6% in October, 3.1% in September and 5.6% in August.

In November, same-store sales rose 2.7% in the front end. Customer traffic in comparable stores dipped by 0.3 percentage point, and basket size grew 3%.

Comparable pharmacy sales, meanwhile, were up 1.2% in November. Walgreens noted that pharmacy same-store results reflect negative impacts of 0.4 percentage point from calendar day shifts (one extra Wednesday and one fewer Monday), 2.2 percentage points from generic drug introductions and 1.3 percentage points from a lower incidence of cough, cold and flu.

"Pharmacy comp sales increased 1.8%, slightly above our 1.4% forecast but below the [Wall Street] 2.9% consensus projection," analyst Mark Miller of William Blair & Co. wrote in a research note released Monday. "An adverse week calendar shift resulted in a 40-basis-point drag to reported comps. New generic introductions unexpectedly accelerated this month to a 220-basis-point drag, up from 180 basis points in October. All else being equal, this should be a positive for pharmacy gross margins."

Prescriptions filled at comparable stores during November inched up 0.6 percentage point, with negative impacts of 0.4 percentage point from calendar day shifts and 0.8 percentage point from a lower incidence of cough, cold and flu, according to Walgreens.

And for the second consecutive month, Walgreens reported a negative effect on prescriptions filled due to its contract dispute with Express Scripts. The drug store chain said the estimated negative impact on comparable prescriptions filled from prescription transfers and other trend analysis of prescriptions managed by Express Scripts was about 1.1 percentage points in November. Still, Walgreens said, total prescriptions filled grew by 1.5 percentage points for the month.

"The negative impact of file transfers from Express Scripts plan members increased to 1.1% from 0.6% in October but was less than the 1.5% drag we had estimated," Miller said in his report. "The 1.1% figure suggests that roughly 10% of Express Scripts' plan members have transferred scripts away from Walgreens, up from 5% in the prior month."

Flu shots administered at pharmacies and clinics season-to-date were 5 million, compared with 5.4 million a year ago, Walgreens said.

Overall November revenue came in at $6.09 billion, up 4.2% from $5.84 billion a year earlier. Sales climbed 4% in the front end and 3.4% in the pharmacy.

For the calendar year to date, sales totaled $66.20 billion, an increase of 6.7% from $62.06 billion in the prior-year period, according to Walgreens.

Revenue for the first quarter of fiscal 2012, which ended Nov. 30, rose 4.7% to $18.16 billion from $17.34 billion a year earlier.

In the first quarter, same-store sales advanced 2.5%, including gains for 2.5% in the front end and 2.4% in the pharmacy. Prescriptions filled at comparable stores increased 1.6%, and total prescriptions were up 2.4% in the quarter.

Walgreens said it opened 31 stores in November, including seven relocations, and acquired one store. As of Nov. 30, the chain operated 7,811 drug stores, 161 more than a year ago, including 26 stores acquired over the last 12 months.

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