Walgreen Continues Its Topline Growth With Strong September Sales

Walgreen (NYSE:WAG), the largest drugstore chain in the U.S., reported a 9.4% annual increase in sales ($5.92 billion) for the month of September. Its calendar 2014 year-to-date sales stand at $57.40 billion, an increase of 6.1% compared to the same period last year. We expect the company to report total sales of around $73 billion for calendar year 2014 (fiscal year ends in August). Walgreen reported its largest quarterly and fiscal year sales increases in three years in Q4 2014, driven by continued growth in its daily living business and prescription volumes. While Walgreen is confident of seeing a continuing growth in its top line, it believes that the gross margin will remain under pressure in the short-term.

As of September end, Walgreen operated 8,305 stores across 50 states in the U.S., the District of Columbia, Puerto Rico, Guam and the U.S. Virgin Islands. The largest footprint in the U.S. places the company in a strong position to benefit, both from an aging U.S. population and from the Affordable Care Act’s expansion of insurance to millions of Americans.

A Quick Snapshot Of Walgreen’s September Sales

Walgreen’s comparable store sales grew 7.9%. Total front-end sales increased 2.2% while comparable front-end sales grew 1.7%. Though customer traffic in comparable stores continued to decline (by 2.7%), Walgreen’s basket size increased 4.4%. Pharmacy sales, which accounted for 67.8% of the total sales in September, increased 14.2%. Comparable store pharmacy sales increased 11.3%. Prescriptions filled at comparable stores increased 6.6%. September 2014 had one additional Tuesday and one fewer Sunday compared with September 2013, which positively impacted prescriptions filled at comparable stores by 2.7 percentage points.

Walgreen Gained Share In The Retail Pharmacy Market In Fiscal 2014

Walgreen revealed in its Q4 2014 earnings call that its retail pharmacy market share grew 30 basis points (to 19%) in fiscal 2014, as it filled a record 856 million prescriptions. It filled 211 million prescriptions in Q4 2014, 4.2% higher compared to the same period last year. According to IMS, Walgreen grew scripts 60 basis points faster than the retail industry in Q4 2014. ^[1] It expects to continue to increase its pharmacy volume and share with high-value customers through growth in Med D, its enterprise specialty business and immunizations.

Since 2013, Walgreen claims that its prescription share with Med Part D seniors has grown more than twice as fast as the overall retail prescription share. It is confident of increasing its share further in subsequent quarters, driven by continued focus on winning high value seniors through preferred relationships with Medicare Part D plans.

Walgreen also intends to increase it share in the specialty market by improving and integrating care for patients with complex chronic disease states. As of August 2014 end, it had access to over 100 limited distribution drugs by manufacturers, which the company believes symbolizes the manufacturers desire to work with Walgreen’s unique specialty network of health system pharmacies, its complex therapy pharmacies and fusion pharmacies and its specialty  retail offering.

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1. Walgreen’s (WAG) CEO Greg Wasson on Q4 2014 Results – Earnings Call Transcript, Seeking Alpha, September 30, 2014 [↩]