By John Kell
Walgreen Co. (>> Walgreen Company) posted its first monthly same-store sales gain in a year in January, aided by an active flu season and firmer prescription orders stemming from the resolution of a contract dispute with a major pharmacy-benefits manager.
The 3.7% increase in same-store sales in January came above the projected 1.5% increase, according to analysts surveyed by Thomson Reuters.
Results last year were hurt by a rate contract dispute with pharmacy-benefits manager Express Scripts Holding Co. (>> Express Scripts Holding Co) that led millions to transfer their prescriptions to rival pharmacies. But since Walgreen and Express Scripts entered a new multiyear agreement that began in September, millions have returned to the fold.
The loss of the Express Scripts customers, as well as higher demand for lower-priced generic drugs, hurt Walgreen's same-store sales throughout 2012. In 2012, January's same-store sales dropped 4.6%.
Walgreen has also successfully courted some customers it had lost in the dispute and hopes to win back more, gains executives expect will be reflected in many of 2013's monthly sales reports. In January, pharmacy sales grew 8.7% and same-store pharmacy sales increased 6.2%, compared with an expected 2.4% jump. Prescriptions filled at comparable stores soared 14%.
Overall, total sales in January grew 6.3% to $6.15 billion from a year ago. Front-end sales were up 1.3%, while same-store front-end sales slid 0.4%, compared with expectations of a 0.5% drop.
Drugstore front-end sales have been helped by a nasty flu season, bolstering traffic and demand for prescriptions and over-the-counter treatments. Walgreen, which provides more flu vaccines in the U.S. than any other retailer, said it has administered 6.9 million flu vaccines so far this season, far above last year's 5.5 million.
But drugstore-retailer results have been stung by increasing demand for generic drugs, which Walgreen said hurt January's pharmacy same-store sales by six percentage points. Strong demand for those drugs products a mixed effect because copycat drugs carry higher margins than branded products but command lower prices, hurting same-store sales.
Last week, Rite Aid Corp. (>> Rite Aid Corporation) reported January same-store sales were up 0.3%, as a very active flu season helped offset the pressure from generics. CVS Caremark Corp. (>> CVS Caremark Corporation), which doesn't report monthly sales data, has already warned same-store sales in the first quarter would be lower. The company's full fourth-quarter results are due on Wednesday.
Walgreen's shares were inactive at $40.01 in premarket trading.
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