Key Walgreen revenue metric rises 2.3 pct in June

Key revenue metric for drugstore chain Walgreen climbs 2.3 percent in June, but stock slips

Associated Press

DEERFIELD, Ill. (AP) -- Shares of Walgreen slumped deeper than the broader market Wednesday after the nation's largest drugstore chain reported June revenue that grew but fell a bit short of expectations in one key area.

The Deerfield, Ill., company said revenue from stores open at least a year climbed 2.3 percent last month compared with June 2012. That included a 3.3 percent gain from the pharmacy, which accounted for 64 percent of total sales, and a 0.8 percent increase from the front-end, or the rest of its stores.

That front-end measure fell short of average analyst expectations of about 0.9 percent, according to Thomson Reuters. But the other measures beat analyst expectations for overall growth of 1.6 percent and a pharmacy gain of 1.9 percent.

Revenue from stores open at least a year is a key indicator of a retailer's health, because it excludes the impact of recently opened or closed stores.

Walgreen Co. said its revenue grew last month even though its stores once again took top-line hits from generic drugs and a calendar shift that gave last month one additional Sunday and one fewer Friday compared to June 2012.

A wave of generic equivalents to brand-name medicines has hurt revenue for drugstores over the past several quarters because generics cost less than their brand-name counterparts. But they also help earnings for those companies, because they come with a wider margin between the price drugstores pay to buy them and the reimbursement they receive for doling them out.

Drugstores typically get more business on weekdays, when customers are more likely to see a doctor and fill a prescription, than they are on weekend days.

Walgreen's revenue growth compared to 2012 also has been helped by a business split last year with Express Scripts Holding Co., the nation's largest pharmacy benefits manager. The drugstore chain fills prescriptions for Express Scripts, but the companies went several months at the start of 2012 without a new contract to work together, and many Walgreen customers migrated to other stores.

That hurt Walgreen revenue last year, which makes it easier to show year-over-year revenue growth this year.

Walgreen said Wednesday it continues to see an increase in the percentage of Express Scripts prescriptions returning to its pharmacies, but it declined to offer details.

Even so, analysts worry that the company is struggling to win back customers it lost during the contract squabble, and Wednesday's report came a week after the drugstore chain also detailed slumping front-end revenue from its fiscal third quarter.

Walgreen leaders have said improving its front-end performance is a top priority.

Total Walgreen revenue from June climbed 2.5 percent to $5.79 billion.

The company operated 8,098 drugstores at the end of last month, more than competitors CVS Caremark Corp. and Rite Aid Corp.

Walgreen shares fell 2 percent, or 93 cents, to $43.53 in midday trading Wednesday while the Standard & Poor's 500 index dropped less than 1 percent. The drugstore chain's shares are still up more than 17 percent so far this year.

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