How Drugstores Can Make You Money With Change

The drugstores competed against each other for a long time, but now they're taking on the rest of retail.

Jan 14, 2014 at 6:00PM

These days, life is all about convenience. We want things to be accessible and affordable, and we want to save as much time as possible acquiring them. And the one area where consumers want all three is food. So what if one of the nation's largest drugstore chains was able to expand its food offerings and make picking up dinner as easy as going to your local drugstore down the block? That's exactly what Walgreen (NASDAQ:WBA) is planning to do.

Walgreen is one of the nation's largest drugstore chains. The company operates more than 8,600 drugstores in 50 states, the District of Columbia, and Puerto Rico. As a result, Walgreen certainly has the size and scale to put more food on its shelves.

During the fiscal first quarter, comparable-store sales rose 2.4%. This was on the back of only a 0.2% increase in traffic but a 2.2% increase in average basket size. A roll-out of more food items will increase the average basket size even further.

Prescription sales remain strong, growing 7.3% in the quarter. Earnings per share came in at $0.72, which was boosted $0.14 by the acquisition of competitor Alliance Boots. Walgreen expects Alliance Boots to add another $0.07 to $0.08 to EPS in the second quarter.

Walgreen remains the leader in the specialty-pharmacy business, ahead of CVS Caremark (NYSE:CVS). The specialty-pharmacy division focuses on services for managing complex and chronic health conditions. This will be a key growth driver for Walgreen with an aging population.

Walgreen is not only looking to offer more food as a convenience, but also banking services as well. The company just launched a prepaid debit card this year that will allow holders to cash checks and have paychecks directly deposited to a linked account. The plan is for consumers to start using Walgreen's locations as bank branches due to the convenience factor. While they're there, they can also pick up everyday items that they need.

Sixteen analysts have Walgreen rated as a buy or strong buy. In comparing Walgreen to CVS Caremark and Rite Aid (NYSE:RAD), Walgreen trades at 15 times next year's earnings, which is lower than both CVS Caremark and Rite Aid. Walgreen also has the least amount of debt among the three, at approximately $5.1 billion, and has the highest dividend yield at 2.2%.

Rite Aid has been up more than 300% over the last 12 months. However, Rite Aid's great run could be coming to an end in 2014. The drugstore turned profitable for the first time in six years during 2013. However, it's now trading right in right inline with the two major pharmacy chains, but it doesn't offer a dividend. Rite Aid also only has 4,600 stores. Compare this to CVS' 7,400 locations and Walgreen's 8,500. 

Bottom line
Walgreen is changing the retail industry once again. It's been going head to head with CVS for a number of years; however, 2014 could be the year that Walgreen moves to the forefront of investors' radars.

But how will Obamacare impact drugstores?
Obamacare seems complex, but it doesn’t have to be. In only minutes, you can learn the critical facts you need to know in a special free report called Everything You Need to Know About Obamacare. This FREE guide contains the key information and money-making advice that every American must know. Please click here to access your free copy.


Marshall Hargrave has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers