Highlights of Walgreen's Success

Convenience is a major asset of the drug store chain, which has 8,000 locations and a firm footing in urban areas.

March 24, 2011

DEERFIELD, IL - The Wall Street Journal highlighted the recent success of Walgreens, whose stock is up roughly 40% in the past six months, nearly four times the gain of the overall market. And all of this while Walmart and Best Buy have experienced a drop in sales.

"[Walgreens] is becoming the substitute for the mid-week shopping trip," said Margaret Kalvar, an analyst at asset-management firm Harding Loevner.

The WSJ noted that "convenience is a big asset" for the drug store chain, which has 8,000 locations and a firm footing in urban markets, unlike Walmart and Target.

Additionally, WSJ noted that Walgreens carries a varied inventory. While prescriptions account for two-thirds of sales, the retailer has added traditional supermarket offerings, including fresh food, beer, and wine, which have helped increase front-end sales at stores open a year or more by four percent, year-on-year, in the quarter ended February.

The company also has been ramping up medical services, including administering flu shots and diabetes counseling, alternatives to walk-in doctor visits that have generated additional foot traffic.

However, the WSJ speculated Walgreen??s main advantage may be its size and accessibility for consumers, with stores on average less than half the size of a Walmart.

The Journal said a significant risk for Walgreens would occur if the economic recovery stalls.

"When the labor market is healthy, "people have more money than they do time," which favors convenience stores like Walgreens, said Goldman analyst Matthew Fassler. However, he said the opposite is true when growth falters.

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