How Walgreen And Rite-Aid Prove My Point
In perfect timing to emphasize the first blog I wrote today, which covered the further fall in the U.S. job count, Reuters issued a report on Walgreen Company (NYSE: WAG) and Rite Aid Corporation (NYSE: RAD).
This morning, when the unemployment figures were first announced, I took issue with statements being made by the AP, claiming that executives were letting their employees go out of caution. That’s an erroneous and dangerous claim to make though.
It’s dangerous because misdiagnoses usually are. Let’s face it: The economy is sick. So how are we going to make it better if we keep giving it the wrong medical readings?
And it is wrong. Both the facts and common sense point to continuing fear among consumers, which is holding them back from making purchases outside of grocery runs and Wal-Mart Stores Inc. (NYSE: WMT) stops. That’s why General Mills Inc. (NYSE: GIS) reported such an excellent quarter, but high-end retailers such as Macy’s Inc. (NYSE: M), Tiffany & Co. (NYSE: TIF), and even the middle class-geared J.C. Penney Company Inc. (NYSE: JCP) have shown poor sales so far this year.
That’s why I wasn’t surprised when both Walgreen and Rite Aid reported a serious drop in sales of such non-necessities as sunglasses, lawn furniture, and other summer goods. For that matter, you shouldn’t be surprised either.
Fortunately for both of them, drugstores such as those two naturally get two thirds of their revenue from prescription sales. So neither of them slid as much as you may think. In fact, even while both of their stock took tumbles today - then again whose didn’t? - Walgreen had some positive data to report, with same-store sales rising 3.4% last month. Rite Aid didn’t fare nearly as well, but its same-store sales only fell by 0.6%.
Thursday, July 02, 2009 - by Jeannette Di Louie, Assistant Editor, Mt. Vernon Research
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