On the Call: Walgreen CFO Wade Miquelon

Walgreen executive says company expects improving return from Balance Rewards loyalty program

Associated Press

Walgreen Co. launched a customer loyalty program called Balance Rewards during its recently completed first fiscal quarter, and the drugstore chain's executives said Friday they expect the program to bolster sales over time.

The program allows shoppers to gain points at both Walgreen and Duane Reade stores and for online purchases. The points translate into cash rewards they can then use at the stores. Walgreen officials expect the program to help sales in the front-end of its stores, or the areas that don't involve the pharmacy.

They say more than 45 million people have enrolled in the program, and it will encourage customers to visit its stores more frequently and buy more items when they're there.

The Deerfield, Ill., company said Friday that its earnings dropped nearly 26 percent in the quarter, as it filled fewer prescriptions and booked some big costs tied to acquisitions it made earlier in the year. Overall, Walgreen earned $413 million, or 43 cents per share, on $17.34 billion in revenue in the three months that ended Nov. 30.

During a Friday morning conference call, Goldman Sachs analyst Matthew Fassler asked about the growth potential of the Balance Rewards program. Walgreen Chief Financial Officer Wade Miquelon responded.

QUESTION: Do the economics get better from here or does the pressure, such as it is, sort of linger for a little while until this program matures a bit?

RESPONSE: Year-by-year-by-year, economics get better. So that doesn't mean necessarily in the next 30 days or whatever ... that that's a turning point. But I think the important thing is that we've done the upfront investment in systems, we've been able to do the heavy investment in enrolling a significant amount of people, and I think the real magic starts to happen as you get enough people with enough points that they can really redeem for things that are meaningful. And that's where we start to drive behavior.

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