Walgreen June same-store sales rise

2/07/2008 - 18:13

By Brad Dorfman

CHICAGO (Reuters) - Walgreen Co , one of the largest U.S. drugstore operators, said on Wednesday that June sales at stores open at least one year rose 3.4 percent, below some analysts' expectations, and its stock fell to its lowest level in almost five years.

Pharmacy same-store sales rose 3.3 percent in June, while same-store sales for general merchandise, known as front-end sales, rose 3.5 percent. The shift of allergy medicine Zyrtec to over-the-counter status helped front-end sales and cut into the number of prescriptions sold.

Walgreen's report led to concern that the weak economy continues to hurt sales of general merchandise at drugstores. Drugstores also face expanded competition from grocery stores and from Wal-Mart Stores Inc , which have been offering discounts on a number of prescription drugs.

"Comps have now been hovering at the 3.5 percent level for the past seven months," Goldman Sachs analyst John Heinbockel said in a research note. "This is reasonable given the challenging macroeconomic environment and sluggish results being generated by most retailers, but is disappointing for a company with 8 percent to 9 percent square footage growth and a reliance on the rapid growth trajectory pharmacy business."

Heinbockel had forecast a 4.7 percent increase in same-store sales.

Generic drug introductions in the past 12 months cut pharmacy same-store sales by 2.1 percentage points, the company said. Generic drugs cost less, lowering sales figures, but are more profitable for drugstores.

Total prescriptions filled at comparable stores rose 0.8 percent in the month.

Pharmacy sales accounted for 65.4 percent of total sales in the month. Total sales in June rose 9.9 percent to $4.81 billion, Walgreen said.

Walgreen shares were down 65 cents or 2 percent at $31.78 on Wednesday afternoon on the New York Stock Exchange after trading as low as $31.67. Shares of rival CVS Caremark Corp were down 59 cents at $38.61.

(Additional by Aarthi Sivaraman, editing by Maureen Bavdek and Gerald E. McCormick)

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