Major drugstore chains have recently clocked sales growth that's, well, like clockwork. Given the ups and down of retail sales in general this year, the numbers are amazingly consistent. The big four, Walgreen
Comparable Sales Growth
|
June Prescriptions |
June Front-End |
June Total |
YTD Total |
|
|
Walgreen |
4.2% |
6.8% |
5.1% |
8.4% |
|
CVS |
4.7% |
6.8% |
5.4% |
6.5% |
|
Rite Aid |
0.6% |
1.1% |
0.7% |
1.9% |
|
Long's |
1.5% |
1.1% |
1.3% |
1.5% |
Walgreen and CVS posted nearly identical comparable sales growth in June -- not only in total, but also in composition. Prescription business was up around 4.5%, and non-prescription up nearly 7%. For both chains, June represents a slightly lower trend than YTD results, but this isn't an indication that sales growth is softening. The June calendar included one additional weekend day and one fewer weekday. Customers have a habit of filling more prescriptions during the week (who wants to be stuck in a pharmacy over the weekend?), so the calendar can have an impact.
Rite Aid and Long's posted much lower sales growth, but very much in line with YTD trends. All four companies are experiencing significant negative sales impact from introduction of generics -- between 6%-7% lower prescription sales growth because of lower-priced replacement drugs. While this may sound like a lot, generics have higher margins, which have allowed the drugstore chains to maintain profit growth.
I'm impressed with the continuing trend of strong front-end sales growth. While script business is bread and butter for these companies, front-end sales are an important incremental business that leverages operating expense. It's not unlike apparel sales at Wal-Mart
Walgreen and CVS (the largest and best-in-class operators) have been on quite a roll of late. June sales results show they aren't missing a beat, and we haven't even made it to flu season yet.
Portfolio feeling under the weather? Check out some more drugstore happenings:
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Fool contributor Timothy M. Otte surveys the retail scene from Dallas. He welcomes comments on his articles, and owns shares of Wal-Mart, but none of the other companies mentioned in this article.
