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Key Walgreen revenue metric inches up in March

Tom Murphy, AP Business Writer

Walgreen Co.'s revenue from established stores climbed slightly last month, as Easter Sunday's earlier appearance compared to last year both helped and hurt the performance of the nation's largest drugstore chain.

The Deerfield, Ill., company said Wednesday that revenue from stores open at least a year rose 0.7 percent in March. Pharmacy revenue fell 1.5 percent, even though prescriptions filled at those stores climbed 4 percent. Revenue from the front end, or rest of the store, climbed 4.2 percent.

Revenue from stores open at least a year is considered a key indicator of retailer health because it leaves out results from locations that have opened or closed in the last year. Analysts surveyed by Thomson Reuters expected, on average, an overall increase of 0.8 percent.

Easter fell on March 31 this year compared to April 8 last year. Credit Suisse analyst Edward J. Kelly expected drugstore front-end revenue to benefit from this, because it shifted some sales to March from April, according to his recent research note previewing March sales reports.

But the analyst also said consumers are still feeling pressured financially, and drugstores also are dealing with more competition and promotions from retailers like Target Corp. and Wal-Mart Stores Inc.

"While results may appear more positive on the surface, we remain concerned about the underlying trend in front-end sales," Kelly wrote.

Walgreen pharmacy revenue fell in part due Easter's appearance on the last day of the month because fewer people fill prescriptions on a holiday compared to a typical Sunday.

Walgreen also said March had one more Sunday and one less Thursday than March, 2012. That hurts comparisons because patients tend to fill prescriptions more during the week, after visiting a doctor.

Generic drugs also hurt pharmacy revenue again last month. Generic equivalents to top-selling medicines like the cholesterol fighter Lipitor have chipped away at revenue for Walgreen and other drugstore operators for several quarters now, because they are less expensive 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.

Analysts also have said they expect Walgreen to have an easier comparison of monthly sales this year with the same month in 2012, when a split with pharmacy benefits manager Express Scripts Holding Co. hurt business.

Walgreen didn't fill prescriptions for Express Scripts, the nation's largest pharmacy benefits manager, for most of last year, and Express Scripts customers migrated to other drugstores. The companies resumed doing business in September.

Walgreen said the percentage of former Express Scripts customers that returned to its pharmacies continued to grow last month, but it offered no specifics.

Walgreen operated 8,077 drugstores at the end of the month, or 230 more than a year ago. It has locations in all 50 states, the District of Columbia, Puerto Rico and Guam.

Total March revenue climbed 2.3 percent to $6.16 billion, compared with March 2012.

Company shares climbed 57 cents to $47.89 in Wednesday morning trading. The stock hit a 52-week high price of $48.18 earlier in the session. Meanwhile, broader trading indexes like the Standard & Poor's 500 index and the Dow Jones industrial average fell slightly.

Walgreen shares have jumped nearly 30 percent since closing 2012 at $37.01.