Shop Talk

Check Out Line: Have a flu shot, spend some more

Check out the impact of signs the U.S. flu season may be weaker this year.

Drug stores such as Walgreen, CVS and Rite Aid are offering flu shots earlier and more conveniently to keep sales from slumping with no expected H1N1 outbreak this year along the lines of last year.

Last year, consumers came for flu shots and bought other items as well, but those related sales could suffer this year. Walgreen, for example, said lower demand for flu-related prescriptions cut 0.3 percentage point from its same-store sales growth in August.

This year, drug stores began promoting flu shots in late August, a week earlier than last year.

Making it tougher for drug stores are rivals like grocery stores (Supervalu and Kroger), and big-box retailers (Target) have been offering flu shots as well.

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Check Out Line: Walgreen, CVS back together

Check out the happy ending to the fight between CVS Caremark and Walgreen over reimbursements for drug prescriptions.

The two drugstore chains left their differences behind and announced a new “multi-year” deal, salvaging a relationship worth billions of dollars.

Earlier this month, Walgreen said it would phase out its arrangement to fill prescriptions for millions of CVS Caremark drug plan members, citing CVS’s efforts to divert customers and inadequate reimbursement rates. CVS retaliated by saying it would dump Walgreen from its network within a month.

The new deal allows Caremark members to continue to fill their prescriptions at Walgreens pharmacies.

Analysts had told Reuters earlier this week that they expected the two chains to resolve the fight as early as within a month, considering the high stakes for both parties.

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Walgreen’s shiny new purchase

Walgreen officially owns New York’s Duane Reade drugstore chain as of Friday, less than two months after the deal was announced.  Walgreen, which got its start in Chicago and is based in a nearby Illinois suburb, is now the biggest drugstore operator in New York City after adding 258 Duane Reade stores, two distribution centers and a corporate office to its 70 stores in the area.

A small percentage of Duane Reade’s stores are rather snazzy, some new and others renovated, and stand out compared to other drugstores, including Walgreens stores, in the Big Apple.  Those makeovers and Duane Reade’s strong push into private label products were some of what attract Walgreen, which is working on its own store upgrades. (But there are still dozens of Duane Reade stores that have yet to get a makeover.)

Reuters recently toured one of the newest Duane Reade stores, in Chelsea.  We thought those of you outside of New York might like a glimpse into what the stores are like.

Here’s part of the fresh food area at the store.  This shop is a bit different, with most of the first floor dedicated to groceries.  It feels more like a mini-supermarket than a drugstore or convenience store, complete with prepared salads, sushi and even gourmet rice pudding.  One floor below, shoppers can buy toiletries, visit a doctor and browse a cosmetics section that’s a bit more like a department store than a drugstore, complete with makeovers.  Oh, and they can also get prescriptions filled, which is one area where Walgreen is expected to overhaul operations with its expertise.

The deal cost $618 million, plus the assumption of debt which Walgreen plans to repay or redeem soon.  One thing the company won’t get — at least for now — is savings from any naming synergies.  Duane Reade will keep running under its own name and chairman and CEO, John Lederer, while Walgreen considers “the most effective way to harmonize both brands over time.”

The 50-year-old Duane Reade name has a lot more recognition in NYC than Walgreens.  Of course, Walgreens does have that big, shiny store in Times Square.  Right across from, you guessed it, a Duane Reade.

(Photos courtesy of Duane Reade)

Check Out Line: Rising sales at Walgreen

Check out the higher sales at Walgreen stores open at least a year.

The largest U.S. drugstore chain said March sales at locations open at least a year rose 2.3 percent thanks to an earlier Easter holiday that drove demand for candy and other merchandise. Walgreen also said an extra weekday boosted sales of prescription medications.

March 2010 had an extra weekday and one less weekend than the previous year, and consumers tend to fill more prescriptions on weekdays.

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Check Out Line: Power plays in the air

Check out the power plays going on in the consumer world.

Walgreen said it will buy Duane Reed for $618 million in cash, catapulting the largest U.S. drugstore operator into the top spot in the New York City area. The deal price also includes the assumption of $457 million in debt.

Duane Reed is owned by private equity firm Oak Hill Capital Partners and operates 257 drugstores in the New York metropolitan area. Duane Reade will continue to operate under its brand name, and Walgreen expects to retain the employees at its stores, pharmacies and distribution centers.

Walgreen operates 70 stores in the New York area, including a multi-floor outlet in the heart of Times Square across the street from a Duane Reade store.

Meanwhile, Barnes & Noble told Ronald Burkle to take a long walk off a short pier, saying it would not waive its “poison-pill” anti-takeover provision to allow the billionaire investor to nearly double his stake in the top brick-and-mortar U.S. bookstore chain.

Talbots, a retailer that caters to mature women, said it amended its merger agreement with BPW Acquisition Corp, a special purpose acquisition company, so as to give greater assurance to BPW shareholders regarding the value of their merger.

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Check Out Line: Walgreen sales catch a cold

Check out a dose of bad medicine for Walgreen.

Analysts had expected the No. 1 U.S. drugstore chain operator to post a 2.2 percent increase in same-store sales. But the company instead posted a surprise 1.1 percent drop. Among factors that hurt the company were a calendar shift. This January had one less weekday in it than last year. That might not seem like a big deal, but Walgreen fills more prescriptions during the week so the shift cut 1.3 percentage points from the same-store sales increase.

Pharmacy same-store sales fell 1.2 percent, a decline made worse by the fact that some of those sales have were in the form of H1N1 flu shots, a one-time item.

The same-store sales decline was also the second monthly surprise in a row.

The problem has also infected the entire store, with general merchandise sales also down.

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Check Out Line: Walgreen sales plenty to sneeze at

Check out the sickly same-store sales at Walgreen.

Same-store sales of general merchandise fell 3.1 percent, with the company saying a decision to stock fewer seasonal items caused much of then drop.

Walgreen, like most retailers, had to sharply discount seasonal items in the teeth of the recession last year.

But prescription same-store sales only rose 1.8 percent, compared with analyst expectations of a 3.1 percent increase. More sales of lower-priced generic drugs, which help profits but cut into revenue, hurt pharmacy sales.

Traffic in stores was also down and when people came in, they bought less.

Maybe those flu vaccines are cutting down on sales of cold medicine and Kleenex.

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Check Out Line: Flu vaccinations aid drugstores

Check out Walgreen’s sales growth.

Walgreen Co, the largest U.S. drugstore chain, said on Friday that September sales at its stores open at least one year rose 5.3 percent, thanks to in-store flu vaccinations and people filling more 90-day prescriptions.

Sales of general merchandise, which consumers have been shying away from in past months, also rose for the first time since May for Walgreen.

Retailers began their seasonal flu vaccinations earlier than usual this year, amid raised awareness of the flu with the H1N1 pandemic. Pharmacy same-store sales rose 7 percent for Walgreen, with the number of prescriptions filled at existing stores jumping 12 percent, including 5.2 percentage points from pharmacists administering seasonal flu shots.

Walgreen, which administered 1.2 million seasonal flu vaccines in last year’s flu season, has already given more than 2.4 million this season and aims to administer 5 million.

But not all drugstores have reported such growth.

Check Out Line: Walgreen has prescription for profits

Check out the better-than-expected profit at Walgreen.

The largest U.S. drugstore chain saw shares rise 10 percent as its fourth-quarter profit benefited from a make-over that includes sprucing up stores and cutting jobs.

Walgreen also announced a new plan to promote 90-day prescriptions available at its stores as an alternative to the mail-order programs favored by many insurance programs.

While sales rose 7.6 percent to $15.7 billion, the company, with 7,042 U.S. stores, has continued to see weak demand for general merchandise.

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Drugstores duke it out for first place

Statisticians in the drugstore industry (if they are out there), must be scratching their heads.

CVS opened its 7,000th store on Sunday.  It was a pretty big deal, with the drugstore company’s president, Larry Merlo, even heading to Little Canada, Minnesota, for Thursday’s grand opening celebration.

So, CVS now has 7,000 stores in 41 states and the District of Columbia, and calls its CVS/pharmacy chain “America’s largest retail pharmacy.”

But take a look at rival Walgreen.

Walgreen, or Walgreens, as the stores are called, has been around more than 60 years longer than CVS.  It has the lead, at least when it comes to stores and states covered.

Walgreen has been paring back its rapid store openings.  Even so, its 7,000th store actually opened the first week in September and it has stores in every U.S state.  Update: Walgreen’s current store count is 7,036.

Let’s take a look at revenue.  CVS has the overall lead, if you include its big pharmacy benefits management business.  If you focus on the stores, Walgreen holds the top spot.  Barely.  According to IBISWorld, Walgreen has 27 percent of industry revenue, while CVS holds 26 percent.