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Key Walgreen revenue figure rises 1.2 pct in April

Tom Murphy, AP Business Writer

Walgreen's revenue from established stores climbed 1.2 percent in April, but analysts expected more from the nation's largest drugstore chain.

The Deerfield, Ill., company's stock slipped Friday morning after Walgreen detailed its performance.

Walgreen said pharmacy revenue from stores open at least a year climbed 4.7 percent compared to last year, but revenue from the front end, or rest of the store, fell 4.3 percent.

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

Analysts expected, on average, that total revenue from Walgreen's established stores would grow 2.8 percent last month, according to Thomson Reuters. They also forecast growth of less than 1 percent from the front end and 4.9 percent from the pharmacy.

Walgreen Co. offered little detail on why its front-end performance dropped, but competitor Rite Aid Corp. said Thursday that an Easter that fell on March 31 instead of April 8, as it did last year, hurt its monthly results.

An earlier Easter likely weighed on results, Credit Suisse analyst Edward J. Kelly said in a research note. But he added that he found the underlying trend during the month disappointing. Kelly said the company's challenges include increased competition from dollar stores.

"Results seem to dispel the theory crafted in March that underlying momentum may be slowly improving," the analyst wrote.

A calendar shift helped pharmacy sales for Walgreen because last month contained one additional Tuesday and one less Sunday than April, 2012. Drugstores typically get more business during weekdays when customers are more likely to see a doctor and fill a prescription.

Prescriptions filled at Walgreen's established stores climbed 9.7 percent compared with April 2012, but generic drug introductions once again reined in revenue growth.

An increase in generic equivalents to brand-name medicines has hurt revenue for drugstores because generics cost less than their brand-name counterparts. But they also help earnings because they come with a wider margin between the price drugstores pay to buy them and the reimbursement they receive for doling them out.

For instance, another Walgreen competitor, CVS Caremark Corp. said Wednesday that generic drugs helped its first-quarter earnings jump 23 percent.

Walgreen has said a business split with Express Scripts Holding Co., the nation's largest pharmacy benefits manager, hurt its performance in April 2012. 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 to fill their prescriptions.

Walgreen and Express Scripts resumed doing business last fall, but analysts expect that the split will make it easier for Walgreen to show monthly revenue growth for the first part of 2013, when compared to last year's totals.

Walgreen had 8,086 drugstores at the end of April, or 231 more than it did in April 2012. Total April sales climbed 3.8 percent to $5.98 billion.

Shares of Walgreen fell 64 cents to $48.24 in midday trading Friday, while the Standard & Poor's 500 index climbed 1 percent. The stock has traded between $28.53 and $50.35 over the past year.