WAG posts 3.9% November sales decline, but 38 million new loyalty members bodes well for future

DEERFIELD, Ill. — Walgreens Wednesday morning reported November sales of $5.9 billion, a decrease of 3.9% versus the same period last year. Total front-end sales decreased 0.3% compared with the same month in fiscal 2012, while comparable store front-end sales were down 1.7%. Customer traffic in comparable stores was down 4.9% while basket size increased 3.2%.

However, registrations for Walgreens Balance Rewards loyalty program, which launched in September, totaled more than 38 million through November, denoting a strong start for the program. 

Sales were likely negatively impacted by store closures related to Hurricane Sandy, suggested Credit Suisse research analyst Ed Kelly, but that wasn't the only drag on drug channel sales. "Additionally, underlying drug store front-end sales were likely pressured by continued consumer weakness, channel shifting to value oriented players and aggressive growth of small box formats like dollar stores," he wrote in a research note published last week. "Industry sales have been disappointing the last few months, and we believe an improvement in November is unlikely."

Walgreens' number of comparable prescriptions filled were down 2.9% for the month, while pharmacy sales decreased 4.7%, including an 8.8% decline in same-store pharmacy sales. Pharmacy sales accounted for 63.2% of total sales for the month. Credit Suisse had projected pharmacy comparable sales declines as high as 11.8%, reflecting a 750 basis point negative impact from lost Express Scripts patients. That may suggest Walgreens has recaptured more than the 30% of former Express Scripts patients projected by Credit Suisse. 

An early start to the influenza season, as suggested by the Centers for Disease Control and Prevention earlier this week, may help to improve pharmacy and over-the-counter same-store sales comparisons going forward, especially compared to the anemic sales contributed to a weak flu season a year ago. 

Overall sales in comparable stores decreased by 6.2% in November, Walgreens reported. Calendar day shifts negatively impacted total comparable sales by 20 basis points, while generic drug introductions in the last 12 months negatively impacted total comparable sales by 570 basis points.

Total sales for the first quarter of fiscal 2013, which ended Nov. 30, were $17.3 billion, down 4.5%. Comparable store sales for the first quarter of fiscal 2013 decreased 7.7%, while front-end comparable store sales for the quarter decreased 2%. Prescriptions filled at comparable stores decreased 4.6% and total prescriptions decreased 3% in the first quarter. Comparable pharmacy sales for the first quarter decreased 10.8%.

Flu shots administered at pharmacies and clinics season-to-date were nearly 4.6 million versus approximately 5 million last year.

Walgreens opened 39 stores during November, including 10 relocations and closed one.