Walgreens Profits Gain On Expanded Merchandise


Look for more beer, wine and food offerings at Walgreens, as the drugstore chain continues its efforts to optimize its product mix, and zeros in on the customer needs that it fills best.

In a conference call announcing its second-quarter earnings, the Deerfield, Ill.-based chain says sales gained 3.1% to a record $17 billion, including a 0.2% decline in same-store sales. And net earnings for the quarter climbed 4.6% to $669 million, up from $640 million in the same quarter a year ago.

Despite "the sluggish economy and lower-than-anticipated sales of flu-related products," president/CEO Greg Wasson says the company is pleased with its ongoing efforts to convert stores to what it calls a CCR, or CustomerCentric Retail, format. At this point, he says, sales at the 700 pilot stores are running about 2% more than unconverted stores, based on gains in transactions rather than traffic.



The CCR program, which includes changes like spruced-up décor and lower shelf fixtures so consumers can see across the store better, focuses on four key merchandise areas and reduces the number of SKUs per store by about 3,500.

Still, "as much as the early flu season helped our first-quarter results, it hurt our second-quarter results," he says. And while it benefited from the two million vaccines it administered in the quarter, "prescription and front-end sales spiked in the first quarter, and slowed when the flu subsided."

Prescriptions, which accounted for 63.3% of sales in the quarter, advanced 3.2%, in part due to fewer flu prescriptions this year compared to the same quarter a year ago. On a same-store basis, prescriptions increased 0.6%.

Wasson says that while there are still questions about how health care reform will affect the company as an employer, "32 million consumers are likely to gain pharmacy benefits, which should help our business," and that its clinic business is also likely to benefit from expanded health care coverage.

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