Walgreen Retains Its Topline Growth Momentum In December On Account Of Strong Pharmacy Sales

Walgreens’ (NASDAQ: WBA) announced earlier this week that its December sales grew 10.2% over sales in the same month in fiscal 2014. The growth was primarily driven by stronger sales in its pharmacy stores and a favorable calendar shift.

Pharmacy sales, which accounted for over 60% of total sales for the month, increased by 15.7% overall and 14.2% in comparable stores, i.e. stores which were opened more than an year ago. As with November this fiscal year, the incidence of flu increased year-over-year in December, to nearly 7.6 million cases versus more than 6.7 million last year, and contributed to an increase in prescriptions filled.

This year’s December had one additional Wednesday and one fewer Sunday compared with December 2013. As weekdays tend to be busier than weekends, these calendar shifts positively impacted the number of prescriptions filled at pharmacy stores and also the month’s sales figures.

While the above factors led to a direct increase in sales, other metrics also edged up. Customer traffic in comparable stores increased 0.3 percent after a 3.3 percent year-over-year drop was seen in November. Prescriptions filled at comparable stores increased by 5.7 percent on a calendar day-shift adjusted basis and basket size increased 2.3 percent.

Analysts and investors reacted positively to Walgreens’ December performance and on Wednesday January 7th, the stock was up over 2.5% and ended at $76.60.

Walgreens Completes the Alliance Boots Transaction

Walgreen completed its merger with Alliance Boots on December 31, 2014, with the aim of creating the world’s first global pharmacy-led, health and well-being enterprise. The combined entity is now called Walgreens Boots Alliance. Note that the stock ticker has changed from WAG to WBA.  At present, Walgreens Boots Alliance has a retail pharmacy network spanning the United States and Europe as well as key markets in Latin America and Asia, with growth opportunities in many developing and under-served markets across the world.  The company spans more than 25* countries, with over 12,800* stores, over 370,000* employees and more than 340* pharmaceutical distribution centers serving more than 180,000* pharmacies and other points of care.

By 2016, Walgreen aims to achieve the following four goals:  1) sales of $130 billion, including Alliance Boots share, as well as associates and joint venture sales; 2) synergies of $1 billion; 3) operating cash flow of $8 billion; and, 4) net debt of $11 billion.

View our analysis for Walgreens Boots Alliance

Our price estimate of $68 for Walgreens is approximately 10% lower than the current market price.

*As at 30 November 2014 including equity method investments on a pro-forma basis excluding Alliance Healthcare Italia which ceased to be an equity method investment of Alliance Boots in December 2014.

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