The nation's largest drugstore chain, Walgreen
No colds, no income
Revenue crept up just 5% to $18.2 billion due to a meeker-than-expected cough, cold, and flu season. The number of flu shots Walgreen administered this year has dropped from a year ago. As of November 2011, it administered nearly 5 million shots, whereas at the same time last year, it had administered 5.6 million. Selling, general, and administrative expenses also rose by 5%, largely because of the acquisition of drugstore.com. All this eventually resulted in the company's bottom line sliding down 4%.
But the major problem for the drug retailer is that for this next year it will not be filling the nearly 90 million Express Scripts prescriptions it did last fiscal year.
Sans Express, Walgreen will be without a pharmacy benefit manager, and to add to its woes, Express is set to join forces with Medco Health
As of last year, Express contributed $5.3 billion in revenue to Walgreen, which is roughly 7% of what Walgreen generated overall. Thus, it stands to lose a hefty chunk of its overall revenues without Express. This may work to the advantage of Walgreen's peers, as customers who are on the lookout for prescriptions can flock to nearby Rite Aid
Walgreen said it may take a hit of $0.21 a share in the next fiscal year -- assuming that it can hold on to at least 25% of its customers with Express Scripts plans. Analysts expect that the breakup may cost Walgreen nearly $4 billion in revenue next year.
So, things aren't looking great for Walgreen. It will be interesting to see how the company copes without Express.
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Fool contributor Shubh Datta does not hold shares in any of the companies mentioned above. Motley Fool newsletter services have recommended buying shares of Medco Health Solutions. 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.