DEERFIELD, Ill. — Same-store sales improved but remained on the downside at Walgreen Co. for October, with Hurricane Sandy impacting results at the end of the month.
Walgreens said Monday that comparable-store sales fell 5.9% in the period through Oct. 31, better than the 11.1% decrease reported for September.
The company noted that calendar day shifts (an extra Tuesday and Wednesday and one fewer Saturday and Sunday versus a year ago) lifted comp-store sales in October by 2.3 percentage points, while generic drug introductions shaved same-store sales by 5.8 percentage points.
Front-end same-store sales were down 2.9% for October. Basket size in comparable stores grew 2.3% during the month, but customer traffic declined 5.2%.
In the pharmacy, comp-store sales dropped 7.5% in October, reflecting a 3.6% positive impact from calendar day shifts. Walgreens said new generics negatively impacted day-fall adjusted (DFA) comparable pharmacy sales by 9.0 percentage points.
Prescriptions filled at comparable stores in October dipped by 1.8% overall and by 5.4% on a DFA basis. Script count got a 3.6 percentage point lift from calendar day shifts, and DFA prescriptions filled at comparable stores also were positively impacted by 0.2 percentage point from a higher incidence of flu versus a year earlier, Walgreens said, adding that these results also reflect the hurricane’s impact.
At the peak of Hurricane Sandy, about 750 of 1,400 stores in the area affected by the storm were closed, according to Walgreens, which said nearly all of those locations have reopened.
For the period from Oct. 1 to Oct. 25, which excludes the impact of Hurricane Sandy, front-end same-store sales declined 2.4 percent, and prescriptions filled at comparable stores were down 4.6 percent, adjusted for calendar shifts, Walgreens reported.
Total sales in October decreased 2.1% to $6 billion from $6.13 billion a year earlier. For the month through Oct. 31, front-end sales fell 1.5%, while pharmacy sales declined 2.6%. Pharmacy sales accounted for 64.8% of overall sales for the month.
"Our strategic decision not to pursue unprofitable promotions resulted in solid margins for the month as we continue to focus on gross profit dollar growth," Walgreens chief financial officer and international president Wade Miquelon said in a statement.
William Blair & Co. analyst Mark Miller noted that Walgreens’ same-store performance in October wasn’t as bad as it seemed, given all of the variables during the month.
"In our estimation, Walgreens’ total underlying comp store sales rose 2% to 3% for October. The company’s sales release had an unusual level of noise this month, and the reported 5.9% total comp-store sales decline appears far worse," Miller wrote in a research note released Monday.
Miller described Walgreens’ front-end sales as "disappointing" in October. "Halloween seasonal sales were soft even before Hurricane Sandy," he explained, "and the estimated 5% comp-sales decline in the final six days of the month was compounded by store closures."
Meanwhile, he said pharmacy sales "modestly exceeded expectations" for the month. "Removing the adverse year-to-year impact of the contract impasse with Express Scripts, we estimate Walgreens’ adjusted same-store scripts increased more than 4% in October (above the rate of growth in the industry)," he wrote.
In his report, Miller pegged Walgreens’ incremental recapture rate for Express Scripts customers at 5% to 15% for October. "Adding that to the 10% to 20% estimated recapture in the last two weeks of September, we estimate the cumulative recapture percentage is 25% since Walgreens re-entered the PBM’s broadest network on Sept. 15. Our recapture estimate for fiscal 2013 (August) is 33%; thus far, that appears to be a reasonable projection," he stated. "Adding that 25% script recapture to the 15% that was previously retained, we believe Walgreens has now recouped roughly 40% of the PBM’s script base."
Walgreens reported that flu shots administered at pharmacies and clinics season-to-date came in at 3.6 million, down from about 4 million last year. However, the drug chain said that enrollments for its Balance Rewards loyalty program, launched in September, climbed to over 28 million through Oct. 31.
For the calendar year to date, revenue was down 3.6% to $57.96 billion from $60.11 billion in the prior-year period. And in the first two months of fiscal 2013, sales totaled $11.48 billion, down 4.9% from $12.07 billion in fiscal 2012.
Walgreens said it opened 21 stores in October, including five relocations. As of Oct. 31, the retailer operated 8,030 drug stores, 244 more than a year ago, including 108 net stores acquired over the last 12 months.
