Retail pharmacy giant Walgreen (WAG) recently stepped forward in online sales expansion with the redecoration of the online version of its Sunday staple, Walgreens advertising circular, especially for its growing online customers. The strategic move on the company’s part is expected to enhance its online sales.
This Sunday edition, which has a readership of more than 50 million people across the US, will contain several digital offering of hundreds of additional items that can be accessed through its online store Walgreens.com and mobile applications. The printed version of this ad circular will also be upgraded accordingly.
Given the growing craze for shopping through online media and mobile applications, Walgreens is presently emphasizing more on this to tap this significant opportunity. The number of online audiences for the circular alone has increased more than 50% annually, which in turn has effectively increased the company’s profitable sales.
Earlier in 2011, Walgreens had acquired online retailer drugstore.com. Through this, the company gained access to more than 3 million online customers. Moreover, it facilitated relationships with new vendors and included approximately 60,000 health, personal care and beauty products through its online offerings.
Walgreens’ constant efforts aimed at minimizing the impact of the loss of the Express Script (ESRX) contract are encouraging. As a result of the recent non renewal of the Express Script contract, Walgreens has foregone its business with major clients like the Department of Defense Tricare plan and WellPoint (WLP).
Although the company estimates that its client retention rate in 2012 will be in the range of 97%-99% of the fiscal 2011 prescription volume, the non-renewal of the contract is expected to hinder Walgreens’ business considerably and affect its position in the drug and health care delivery sector.
In addition to the re-launching its advertisement circular, the company recently came up with its comprehensive Patient Transition Plan, which will help smoothen the transition of existing members of the Express Scripts pharmacy network to another community pharmacy. Under this plan, Walgreens is providing several discounts to members of Walgreen Prescriptions Savings Club, which facilitates savings on over 8,000 brand names and all generic drugs.
We are optimistic about Walgreens’ long-term prospects. The introduction of new generic drugs should help improve the company’s gross margin in the second half of fiscal 2012. Moreover, a strong cash balance enables the company to reward its shareholders.
Currently, we are Neutral on Walgreen’s, which corresponds to the Zacks #3 Rank (short-term Hold rating).
To read this article on Zacks.com click here.
Zacks Investment Research
