Walgreen fiscal 1Q profit sinks nearly 26 pct

Published on NewsOK Modified: December 21, 2012 at 5:23 pm •  Published: December 21, 2012
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The companies had let a contract between them expire last December, and their new agreement didn't start until September. The split meant many Express Scripts customers migrated to new drugstores for their prescriptions.

Walgreen is trying to bring those customers back, but competitors like CVS Caremark Corp. and Rite Aid Corp. are pushing aggressively to keep them.

Walgreen said prescriptions filled at stores open at least a year fell nearly 5 percent in the quarter, a smaller decrease than the 8 percent drop it reported in the previous quarter. The drugstore chain saw that improvement as a sign that customers are returning.

"We think we can redeem significant portion of these customers over time," Wasson said.

Walgreen said prescription revenue from stores open at least a year fell 11.3 percent, while revenue from the front end, or rest of the store, dropped 2 percent. Revenue from stores open at least a year is considered a key indicator of retailer health because it excludes stores that recently opened or closed.

Generic drugs have squeezed revenue for Walgreen and other drugstores this year because they are cheaper than brand-name drugs. But they help profitability because they come with a wider margin between the cost for the pharmacy to purchase the drugs and the reimbursement it receives.

Walgreen launched a customer loyalty program called Balance Rewards during the quarter. It allows shoppers to gain points at both Walgreen and Duane Reade stores and for online purchases that translate into cash rewards they can then use at the stores.

Walgreen executives said the program will encourage customers to visit their stores more frequently and to buy more.

"We now have a new kind of currency in place that will help drive our front-end business," Wasson said.