Drugstore chain Walgreen Co. (WAG) said Wednesday morning that its sales for August rose from last year, bolstered by promotions - a move that will cut into margins. The company reported that existing store locations saw sales growth of 0.9%.
The company, which operates under the Walgreens brand name, revealed that sales for the month of August increased 6%, reflecting a 4% growth in pharmacy sales and a 0.9% increase in comparable store sales. Comparable store front-end sales for the month increased 3.5%, while comparable pharmacy sales decreased 0.5% due to generic drug introductions and a decline in total prescriptions filled at comparable stores.
According to the Deerfield, Illinois-based company, promotional programs drove solid sales and customer traffic in August. However, the company noted that the aggressive promotions would negatively impact front-end margins in the quarter.
Walgreens recorded sales of $4.90 billion in August, up 6% from $4.63 billion for the prior-year period. Pharmacy sales accounted for 65.3% of total sales for the month.
Comparable store front-end sales for the month increased 3.5%, partly helped by strong sales of consumables and key beauty items. Zyrtec's switch to over-the-counter status from prescription benefited front-end sales by 0.5 percentage points.
For the month, pharmacy sales grew 4%. However, comparable pharmacy sales decreased 0.5% on a negative impact of 2.4 percentage points due to generic drug introductions in the last twelve months.
Total prescriptions filled at comparable stores declined 2.7% on a negative impact of calendar shifts and the switch of Zyrtec from prescription to over-the-counter status. The company noted that calendar day shifts had a negative impact of 2.3 percentage points on total sales for the month, as pharmacy patients fill more prescriptions during the week than on weekends. Also, August 2008 had two fewer weekdays compared to the same period last year.
The company's calendar year-to-date sales grew 9.9% to $39.50 billion from $35.94 billion in the same period last year.
Total sales for fiscal 2008, which ended August 31, increased 9.8% to $59.04 billion from $53.76 billion in the previous year. Comparable store sales for the year increased 4.0%.
Looking ahead, Walgreens noted that for the month of September 2008, calendar day shifts would have a significant positive impact on comparable prescriptions filled. Compared to the prior-year period, September 2008 gains a Monday and Tuesday while losing a Saturday and Sunday.
During the month of August 2008, Walgreens opened 92 drugstores, including five relocations. As of August 31, Walgreens operated 6,941 locations in 49 states, the District of Columbia, Puerto Rico and Guam.
In Wednesday's regular trading session, WAG is trading at $35.63, down $0.37 or 1.03% on a volume of 4,850 shares. The stock has been trading in a range of $31.25-$48.09 in the past 52 weeks.
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