Walgreen Plans New Acquisition, June Sales Fall

Walgreens aquires a regional drug store chain in hopes of reviving declining sales

By Tom Murphy
|  Thursday, Jul 5, 2012  |  Updated 11:15 AM CDT
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Walgreen Plans New Acquisition, June Sales Fall

AP

Pharmacy operator Walgreen Co. said Thursday that a key revenue metric fell 10 percent in June, as it took another step to battle a sales slump by acquiring a regional drugstore chain. 

The sales slump for Deerfield-based Walgreen has been driven largely by its split with pharmacy benefits manager Express Scripts Holding Co.
 
Walgreen said revenue from stores open at least a year sank 10 percent last month as the introduction of some generic drugs also hurt sales. Revenue from stores open at least a year is considered a key indicator of retailer health because it isn't skewed by stores that recently opened or closed.
 
Pharmacy revenue from stores open at least a year dropped 15 percent, while revenue from the front-end or rest of the store only fell 1 percent.
 
Analysts expected, on average, an overall drop of 8.2 percent from the nation's largest drugstore chain, with pharmacy revenue sliding 12.1 percent and front-end sales dropping 1.5 percent, according to Thomson Reuters.
 
Walgreen said prescriptions processed by Express Scripts comprised of 12.6 percent of its total in June 2011. Walgreen stopped filling prescriptions for Express Scripts at the end of last year, when a contract between the companies expired. The drugstore chain's sales have fallen for the past several months.
 
Walgreen also said Thursday it will spend about $438 million to buy a 144-store chain focused on the mid-South from the privately held Stephen L. LaFrance Holdings Inc., which is based in Little Rock, Ark.
 
Stores in the chain include USA Drug, Super D Drug and May's Drug. They are located in Arkansas, Kansas, Mississippi and Missouri, among other states.
 
The deal, expected to close around Sept. 1, is much smaller than the $6.7 billion Walgreen said it would spend last month for a stake in European health and beauty retailer Alliance Boots, the largest drugstore chain in the United Kingdom.
 
For that deal, Walgreen also has an option to buy the rest of the company in about three years in a deal valued at around $9.5 billion.
 
Walgreen runs 7,890 drugstores in all 50 states, the District of Columbia and Puerto Rico. The company's stock price slipped below $30 after it announced the Alliance Boots deal last month and hit a 52-week low of $28.53 before rebounding a bit.
 
Its shares rose 10 cents to $29.70 in morning trading Thursday, as broader trading indexes were mixed.

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