On Monday, Walgreen (NYSE: WAG ) reported its sales results for December 2013. In the report, the company announced strong sales metrics, but shares only rose 0.56% in a sign that Mr. Market wasn't terribly impressed. After seeing these numbers come in, is it possible that Walgreen offers investors tremendous value to be had or is it really just a dud? To answer this proverbial question, I dug into the company's press release and put together a fair summary of its financial results for the month and compared its historical returns to those of competitors like CVS Caremark (NYSE: CVS ) and Rite Aid (NYSE: RAD ) .
Walgreen ended the year strong
For the month of December, Walgreen saw its sales come in at $7.2 billion. This represents a 7.1% increase over the $6.72 billion the company experienced during the same month a year earlier. Part of the rise in sales was driven by a 4% increase in front-end sales, 2.5% of which was derived from an increase in comparable store front-end sales. Although this may not sound terribly impressive, the company's comparable store front-end sales more than doubled the 1% increase seen by rival Rite Aid.
Throughout the rest of the store, the company's results came in even stronger. During the month, comparable store sales in its prescription category of sales rose 5.3% while its pharmacy sales broke the double-digits by rising 10.2%. However, on a comparable store basis, pharmacy sales were a bit lower at 9%. Just as in the case of front-end sales, Walgreen's prescription and pharmacy sales smashed the 2% decrease and 4.1% increase, respectively, in comparable store sales experienced by Rite Aid during the month. Throughout Walgreen, comparable store sales rose an impressive 6.1%.
On top of these attractive growth metrics, the company saw some positive developments in its expansion efforts. During the month, the company opened five new stores (including one relocation), bringing its 12-month openings to 62. This growth represents a 0.7% rise in store count to a total of 8,674 for the company's 2013 calendar year. On an absolute basis, this isn't much to be impressed by, but the company's modest growth in store count surpasses the 0.8% decrease in Rite Aid stores from 4,630 to 4,592 by December of 2013.
How does Walgreen stack up to its peers?
Looking at the situation of each company over a longer period of time can give us a better idea of kind of value offered to shareholders. Over the past five years, sales at Walgreen have grown by 14% to go from $63.3 billion to $72.2 billion, while Rite Aid's revenue has been at a virtual standstill. Only CVS, which saw its revenue rise an eye-popping 40.8% from $87.5 billion to $123.1 billion, performed better.
Using the same timeframe, the Foolish investor would see that net income at Walgreen has risen a respectable 22.1%, allowing the company's net profit margin to hover between 3% and 3.8%, with a five-year average of 3.3%. In comparison, CVS saw its five-year net profit margin average a slightly higher 3.5%, but it should be noted that its bottom line results have dropped annually as management strives to grow the company at the cost of margins. Rite Aid's results are even worse, with its five-year net profit margin coming in at -3.2%, but improving almost every year as management focuses on consolidation and cost containment instead of store or sales growth.
Compared to the company's December 2012 results, sales results came in relatively strong. Not only did Walgreen experience attractive growth in each department while rival Rite Aid saw only a modest uptick, but also the extent of its growth might signal that the company is beginning to pick up steam and could grow even faster moving forward.
But of course, not everything is picture-perfect. During the month, Walgreen saw customer traffic fall by 1.3%, which may suggest that the cost cutting practiced by Rite Aid and CVS might be stealing its customers away. Thankfully, this was more than offset by a 3.8% rise in basket size so shoppers may not be leaving but may, instead, be buying in bulk.
On a historical basis, Walgreen seems to come across as a middle-of-the-road opportunity. Unlike Rite Aid, the company isn't consolidating but it also isn't growing at the fast pace boasted by CVS Caremark. On the other hand, the company is more concerned about at least maintaining its current margins such that its profits don't fall as a percentage of sales like CVS has seen, but not to the point that it's experiencing consistent improvements like Rite Aid has. For these reasons, the company might be an attractive prospect for investors who want a long-term holding that won't take too many risks but who also likely won't rise to the moon over night.
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