It�s difficult to determine the true effect of the $4 PR campaign, but the number thrown around by CVS and WAG execs is: �a minimal effect, less than 1 script per store per day.�
Using some known variables and making a few assumptions, we can get a rough calculation of the effect to Walgreens� sales.
Variables and Assumptions:
1. less than 1 Rx per day � lets say 0.8 (generous IMO). The $4 program has been in my state for over 1 month and I haven�t transferred a single script to the Sams Club 4 blocks down the road.
2. roughly 5500 stores
3. 365 days per year (included for the benefit of Kanuk)
4. roughly 580,000,000 scripts Walgreens will fill this year
5. pharmacy sales are about 70% of total sales
6. these $4 scripts are very cheap, I�d say each generate less than � the sales of an �average� script (extremely generous IMO).
Punch the numbers and you get at most, a loss of:
0.067% of pharmacy sales
0.048% total sales
This is a very rough calculation, I admit. (The true effect is likely much less, perhaps even an order of magnitude less). The actual dollar numbers may seem large, but the relative effect is miniscule compared to the SSS and total sales numbers WAG consistently puts out.
And this, I believe, is a worst case scenario. WMT has had massive free PR in print, tv, internet, radio over the last several months. Now it�s old news. As time passes, the effect should diminish to a negligible, not-even-worth-calculating number. And perhaps, as immerlogic suggests, WMT may decide to eventually rid itself of this horrible loss-leader.
Either way, Walgreens has not been affected in any meaningful way. When drugstore.com was the threat-of the day, I remember transferring quite a few scripts to them. The chicken littles were out in force back then too (THE END OF BRICK AND MORTAR PHARMACIES!). And now, they�re basically a joke in the drug retailing world. In the big picture of Walgreens growth and expansion, this $4 PR stunt will be but a small bump in the road.
What has happened in my city (and possibly others) is these $4 generic rx's offered by Wal-Mart has put more pressure than ever on "Mom and Pop" independent pharmacies (which were barely getting by in the first place). Since the advent of the $4 rx's in my town 3 different independent pharmacies have sold to Walgreens. After taking their business we are now busier than ever and without having to adjust our pricing schedules. Most of these customers prefer our convenience and longer hours to the hassle of going to a Wal-mart just to save a dollar or two. Wal-Mart is "crushing the competition" but it was "Mom and Pop" who were in the crosshairs, not Walgreens.
Cash-only niche pharmacies are also sweating bullets over WMT�s $4 program. And with lower reimbursement from Medicare Part-D, a lot of independents are throwing in the towel. I�ve also heard of Walgreens aggressive courting of independents, buying their scripts and hiring the pharmacists to boot. It�s a brilliant counter-strategy to WMT�s PR gimmick.
What I am waiting for, is Walmart's soon to be announced plan on starting a smaller drugstore like store geared towards Senior citizens.
Yep, they are about to do that.
I think it will be great for WAG. Reason(s): WAG has gobbled up the best locations. They have 105 years experience. Walmart will dump a ton of $$$ in stores that will lose.
This will happen in 2007.
Excellent post. Even more, those who would go to WMT as cash customers to get the $4 deal, are not exactly high revenue, profitable customers at WAG. The valued WAG customer is one (like my wife) who goes there 2-3 times a week: once through the drive-through and a couple of times to drop $30-$40 on all kinds of other stuff for the family.
I think it's time to put to rest all of the comparisons of Walgreen's vs. Wal-Mart vs. CVS. Anyone who has visited these three stores on more than one occassion will realize that Walgreen's either does not have the same target market (WMT) or it's a much better shopping experience (CVS). People who would transfer their scripts to take advantage of the $4 plan probably wouldn't shop at WAG to begin with. Also, WAG's store conditions, locations, and customer service put CVS & others to shame (in my experiences; I only speak for myself). Sure, there are still valid comparisons to be made between these retailers, but the ones offered so far seem a bit obtuse coming from people I assume have a vested interest in Walgreen's (thus, should be more informed than they're making themselves out to be).
Yank you ignorant douchbag, take a look at Taiguy's post and see how it is supposed to be done.
He actually uses facts a figures that are confirmed and reliable instead of the ones like you use that are pulled out of your ass. Why don't you give us the exact figures that SprawlMart is up in pharmacy instead of saying double-digits. They have never even posted any figures because they are NOT up double-digits! The $4 scrip is a joke for all but the unemployed losers (like you and your girlfriend Kanuk_PQ) and the real working people of this country will not lower themselves to go shop in a dirty, messy slum that is the average SprawlMart.
You, of course, would feel right at home because dirty and messy are second nature to you along with being broke and stupid!
Did you get one of those t-shirts that up.tobat sent you a picture of? You can wear one of them when you and that twit Kanuk_PQ go to your next GLBT meeting. They are having a banquet serving both crow and dead cats. Yummy! You will love it! That small bump in the road is the Wag bandwagon running over you two morons who persist in hating (envying) a great company! Next stop for you two is Loserville (home). See ya sucka!!!!!
I pay $5 co-pay for filling my prescription at WAG. For the additional $1, I get:
a) shorter driving (WAG is within 5 miles while WMT is 20 miles away)
b) convenient hours (they open 24 hours)
c) less waiting (I can order my prescription over the phone)
d) easier parking
e) drive-thru available if I have a baby sleeping in the car
Having said that, I think both WAG and WMT are great companies.
I agree. When the gas price is high, I no longer drive to Walmart just to save a couple of dollars. (I own WMT stock) Walgrees is good at picking store locations. I like the location of its new store in our city. In San Fracisco, the stores are right at the bus stops. People are using Walgreens like a convenience store to get groceries and supplies after they get off the buses. I bought WAG recently when the seeming "bad news" came out. My brother loves the Walgreens brand of the merchandise. He thinks the Walgreens goods are quality products with good values.
"Money Magazine stated American consumers could save $25 Billion a year by converting to generic medications."
Who do you think fills most of the generics prscriptions now? Walgreens. What is the gross profit the largest on? Generics. Walgreens has been trying to get their customers to fill their scrips with generics for years and years. They make the MOST profit on generics as opposed to name brands. The formularies that 3rd party programs reimburse customers for dictate that they be filled with generics. The manufacturers are the ones pushing name brands due to patents which protect their profits. They make more money on name brands than on generics. Generics will only BENEFIT Wag. Learn the business and then post. You are so ignorant of what is happpening in the drug store business it is almost painful. Again, smarten up then post! Please!
If you are predicting a plummet of to <10 per share. Can you please indicate how many shares you are shorting or have short.
I have been sitting here reading the banter between irun and you and I was wondering if you are going to short WAG since you can make $20+ per share based on your analysis. irun has said this is heading to 36 and has shown that he is long.
This way we have a "scorecard" on both of you, and not just irun.
SOoooo... then you've sold your position to minimize your losses?
No, Yank. You have no strategy. I DID Notice that you failed to answer the question banana posed, though.
Oh, and maybe it's Alzheimer's
"WAG has still far out-performed the S&P since then, but he doesn�t care as he does not deal in facts."
I think he said it pretty good with this statement. You need to take a reading class to see the whole statement and retain some knowledge of what you read. Right now you are getting an
"F" in reading and comprehension
"F" in investing 101
"F" in moron recognition (mirror is required in this course)
"F" in the art of humor (remember what they said at the dinner for the Yank fan club meeting, "Yank, party of one")
"F" in meteorology (you never know which way the wind is blowing or even up from down)
Not a very good report card!
1. Total Rxs 2006: 530 million
2. Pharmacy represents about 65% of total sales
The corrections don�t change the conclusion: negligible effect
Another way to look at it: November 2006 saw a 16% sales increase over last year. Without the $4 scam, it MAY have been a 16.05% increase at best � a difference hardly worth mentioning.