Drugstores Log Weak Sales in December
U.S. drugstores reported unusually weak December sales Thursday, weighed down by a slow flu season, lower-priced generic drugs and sluggish sales of seasonal items.
The sales results sent shares of the two largest drugstore operators, Walgreen and CVS Caremark down more than 4 percent each.
For Walgreen, the 2.6 percent increase in sales at stores open at least a year it posted for December was the smallest increase going back until at least 1990, a spokeswoman said.
Pharmacy same-store sales rose 3.3 percent, while same-store sales of general merchandise, or "front end" same-store sales, rose 1.7 percent.
Walgreen filled 1.4 percent more prescriptions in the month than a year earlier, held back by the milder flu season. The company said the weak flu season cut the increase in prescriptions filled by 2.6 percentage points.
"The flu is particularly weak, so that's a factor," Mark Miller, an analyst at William Blair & Co, said, noting that the industry is also seeing sales hurt by new generic drug introductions, which, while more profitable for drugstores, cut into sales figures.
CVS, which posted a 1.8 percent increase in same-store sales for the five weeks ended Dec. 29, said pharmacy same store sales rose only 2.4 percent, with recent generic introductions knocking 4.7 percentage points from the sales increase.
Front-end same-store sales rose 0.6 percent.
"Sales in December were lighter than anticipated due to adverse weather conditions early in the month, a slowly developing flu season, and general economic conditions," Tom Ryan, CVS chairman and chief executive, said in a news release.
But CVS also forecast 2007 earnings in the range of $1.91 to $1.92 a share, at the high end of its previous forecast range of $1.89 to $1.92 a share.
For the fourth quarter, CVS forecast 54 cents to 55 cents a share. Analysts, on average, forecast 55 cents, according to Reuters Estimates.
Meanwhile, smaller rival Rite Aid posted a 0.5 percent same-store sales decline in December. Prescription same-store sales were flat and front-end same-store sales fell 1.2 percent.
Walgreen shares were down $1.80 at $35.56 and CVS fell $1.72 to $37.63 Thursday on the New York Stock Exchange.
Rite Aid shares were down 2 cents at $2.67.
Before Thursday, Walgreen traded at about 16.9 times estimated 2008 earnings, compared with a multiple of 20.5 for CVS Caremark.
Rite Aid is forecast to have a loss for the year, so its price-to-earnings multiple is not applicable.