Walgreen Co. reported a decrease in comparable-store sales for August as introductions of lower-priced generic drugs pared pharmacy revenue.

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Comp-store sales decline at Walgreens

September 6th, 2012

DEERFIELD, Ill. – Walgreen Co. reported a decrease in comparable-store sales for August as introductions of lower-priced generic drugs pared pharmacy revenue.

Walgreens said Thursday that same-store sales fell 8.2% in August, reflecting a negative impact of 5.1 percentage points from generic drug introductions. That was down from a 7% decrease in July, which had marked an improvement from a 10% comp-store sales decline in June.

In the front end, August same-store sales dipped 0.6% year over year. Customer traffic in comparable stores was down 2.2%, and basket size grew 1.6%.

Comparable pharmacy sales sank 12.4% in August. Walgreens said pharmacy same-store sales were negatively impacted by 7.9 percentage points from new generic drugs and by 10.7 percentage points from the drug chain not being part of the Express Scripts pharmacy network.

Prescriptions filled at comparable stores fell 6.8% in August. Higher incidence of flu positively impacted the same-store prescription count by 0.4 percentage point, Walgreens said, while not being part of the Express Scripts network negatively impacted prescriptions filled by 10.7 percentage points. Prescriptions processed by Express Scripts comprised 12.6% of Walgreens' prescriptions in August 2011, the drug chain said.

Walgreens and pharmacy benefit manager Express Scripts announced a settlement of their contract impasse in July, and the chain is set to rejoin the PBM's network on Sept. 15.

Still, Walgreens saw more fallout from the dispute this week. TRICARE, the health and pharmacy benefits program for the U.S. armed forces, on Wednesday posted a notice on its website saying that it's not changing Walgreens' status as a non-network pharmacy provider, even though the chain will rejoin the Express Scripts network this month.

Express Scripts is the PBM for TRICARE. As of Jan. 1, when Walgreens had ceased its participation in the PBM's pharmacy network, about 6 million TRICARE beneficiaries lost in-network insurance coverage for prescriptions filled at Walgreens and Duane Reade drug stores.

"Express Scripts has determined it will maintain the same robust retail pharmacy network of more than 57,000 pharmacies available to TRICARE beneficiaries," the online notice from TRICARE stated. "Walgreens left the TRICARE retail pharmacy network when their contract with Express Scripts expired on Dec. 31, 2011. On July 19, 2012, Express Scripts and Walgreens announced a new network agreement. However, in line with TRICARE management activity's commitment to the efficient management of the TRICARE pharmacy benefit, Walgreens will remain designated as a non-network pharmacy provider for TRICARE beneficiaries."

For August, Walgreens posted total sales of $5.85 billion, down 4.5% from $6.12 billion a year earlier. Revenue edged up 0.9% in the front end but dropped 12.4% in the pharmacy. Walgreens said pharmacy sales accounted for 64.1% of total sales for the month.

Sales for Walgreens' fiscal 2012 fourth quarter ended Aug. 31 came in at $17.08 billion, down 4.9% from a year ago. Comp-store sales in the quarter fell 8.7%, reflecting a 1.3% decline in the front end and a 12.6% decrease in the pharmacy. Prescriptions filled at comparable stores were down 8% in the quarter.

Calendar year-to-date sales declined 3.2% to $46.49 billion, while overall sales for fiscal 2012 dipped 0.8% to $71.64 billion. Same-store sales for fiscal 2012 fell 3.6%.

Walgreens said it opened 18 stores during August, including six relocations, and closed two stores. As of Aug. 31, the chain operated 7,929 drug stores, 169 more than a year ago, including 42 stores acquired over the last 12 months.