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  • taiguyandcheeky taiguyandcheeky Dec 5, 2006 6:54 PM Flag

    The $4 PR Effect on WAG

    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 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.

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    • 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.

    • 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.

      • 1 Reply to llnvstr168
      • 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.

    • 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.

      • 1 Reply to alpharettamadness
      • 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).

    • 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.

    • 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!!!!!

    • This may well be the dumbest post of all time!

    • You should have bought in Monday Dec 4, 2006 or within the previous 3 months of that date.

    • Immerlogic,

      Kind words indeed, thank you. In truth, I�ve tried to emulate your calm, reasonable and thoughtful approach to posting, and so I direct your generous compliment back to you.

    • "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!

    • I'm surprised if he hasn't bitched at the givers of the stock for giving him such a bad deal.

      Don't look a gift horse in the mouth.

      What a thankless ass. I wish someone would have given me such a generous gift. I wouldn't have sold the majority of it. However, it is good to be diverse in your portfolio.

      33k shares isn't chump change.

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