H1N1 Lifts Walgreen During Slow Holiday Sales Start

Early holiday sales looked pretty slow for many retailers this year including drugstore chain Walgreen Co. (WAG). The 7,649-store chain does have one thing going for it so far, though, a flu season getting more attention than normal due to the H1N1 vaccine that's provided at the retailer's locations.

Though hospitalizations are abating in hard-hit states like California, now the vaccine is readily available in many areas, and health departments are still urging many citizens to get it. Walgreens locations aren't the only places to get the vaccine, other competitors, such as CVS Caremark (CVS), are offering it as well.
Despite slower front-end sales than normal, Walgreen still turned in a very strong financial period, with first-quarter earnings rising 19.6 percent year over year, hitting $489 million. Those numbers were helped in part by five million flu shots administered at stores, 200,000 of them for H1N1.

And executives expect that number to increase. "We anticipate growing demand this week for H1N1 flu vaccine as additional supply is delivered," said Greg Wasson, president and chief executive during the company's conference call. "We're working with government agencies to obtain more H1N1 vaccine, and we intend to have it available at virtually all of our pharmacies as soon as possible."

And it's not as if non-pharmacy sales were terrible for the retailer. Walgreen's first-quarter total sales increased 9.5 percent. Same-store revenue increased 2.7 percent in the front end of the store, while pharmacy items rose 4.9 percent. By comparison, competitor Rite Aid's (RAD) front-end sales fell 2.5 percent.
Walgreen's front-of-the-store sales could improve through the month of December, Wasson predicted. Many consumers seemed to procrastinate even more than in the past. Plus, stores like Walgreens are convenient place to buy last-minute gifts, and the company's locations were open on Christmas.

We'll see the results when monthly sales figures come out next month. But until, then H1N1 and other flu vaccines could be some major traffic drivers in Walgreen stores.