Walgreen's flu revenue down, holidays start slow

AP News
Posted: Dec 02, 2009 4:24 PM

Walgreen Co. said Wednesday that demand for flu shots and related products has tapered off, leading to disappointing sales in November for the drugstore chain.

Walgreen has dispensed more than 5 million flu shots since the beginning of September. That's more than four times the number it administered during the entire 2008 flu season, from October 1 to February 28.

However, Walgreen's said the volume was noticeably slower in November compared with September and October. Consumers apparently have already received their shots or stocked up on other remedies.

The slumping economy also led to a weak start to the holiday season. The company began selling some popular items on Thanksgiving instead of the day after, and said post-Thanksgiving promotions were "notably softer" than a year ago. For stores open at least a year, Walgreen said sales rose just 3.9 percent, well below the 6.1 percent increase expected by analysts surveyed by Thomson Reuters.

The weaker flu business and the holiday promotions hurt sales at in the "front end," or non-pharmacy, parts of Walgreen stores. The Deerfield, Ill., company said pharmacy revenue was hurt by new launches of low-cost generic drugs.

At stores open at least one year, pharmacy revenue rose 5.7 percent, and sales of "front end" items like cosmetics and food grew 0.8 percent. Analysts expected pharmacy sales to rise 7.2 percent and front-end sales to rise 3.8 percent.

Walgreen shares lost $1.17, or 3 percent, to close at $38.20.

Sales at stores open at least one year are considered a key indicator of retailer health because they shows results at older stores, leaving out revenue from newly opened locations. Walgreen runs 7,147 drugstores around the U.S., including 517 that were opened in the last year. It also has about 500 worksite health centers, home care facilities, and specialty and mail-order pharmacies.

Walgreen opened 47 stores during the quarter, including seven that were relocated, and acquired two stores.

For November, the company's total revenue grew 8.7 percent to $5.36 billion from $4.93 billion a year ago. Pharmacy sales rose 9.7 percent. Front-end sales increased 6.1 percent.

For the first three months of fiscal 2010, Walgreen said its revenue grew 9.5 percent to $16.36 billion from $14.95 billion. That surpassed analyst expectations of $16.26 billion.

The company is scheduled to report its fiscal first-quarter results on Dec. 21. Analysts are looking for a profit of 48 cents per share, on average.