Economy & Finance

Key Walgreen revenue metric falls 6.1 pct in Dec.

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— An important Walgreen revenue measurement slid more than analysts expected in December, even though prescription counts continued to recover for the nation’s largest drugstore chain since the resolution of a contract dispute.

The Deerfield, Ill., company said Friday revenue from stores open at least a year dropped 6.1 percent last month as a shift toward generic drugs and a calendar quirk hurt the company’s sales. Pharmacy revenue tumbled 8.9 percent, while revenue from the front end, or rest of the store fell, 2.3 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 expected, on average, an overall decrease of 5.2 percent, according to Thomson Reuters. They expected a slightly larger than reported drop of 9 percent drop in pharmacy revenue coupled with a gain of less than 1 percent from the front end.

Walgreen runs more than 8,000 drugstores.

Walgreen said a calendar shift that added one Sunday and Monday to last month while taking away a Thursday and Friday, compared to December 2011, affected results. Drugstores typically get more business during weekdays when customers are more likely to see a doctor and then fill a prescription.

The company said customer traffic fell 4 percent in stores open at least a year.

Generic drugs also squeezed pharmacy revenue again. The introduction of generic equivalents to popular brand-name drugs like the cholesterol fighter Lipitor has hurt drugstores because generics cost less than their brand-name counterparts. But these generics also boost profitability because they come with a wider margin between the cost for the pharmacy to purchase the drugs and the reimbursement it receives.

Walgreen said prescriptions filled at its established stores fell 2.3 percent last month, but they were flat when adjusted for the calendar shift. A drop in prescriptions filled at Walgreen stores has eased steadily since the middle of last year.

A contract dispute with pharmacy benefits manager Express Scripts Holding Co. hurt Walgreen’s revenue last year. It didn’t fill prescriptions for Express Scripts for the first eight and a half months of the year, and Express Scripts customers went to other drugstores.

Overall, Walgreen’s revenue fell 4 percent last month to $6.71 billion in December.

Company shares fell 41 cents to $37.38 in Friday morning trading, while the Standard & Poor’s 500 index climbed slightly.
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