Walgreen Co. (WAG) said same-store sales rose a less-than-expected 2.1% in August, the third-straight monthly increase, as the nation's largest drug store chain also announced it will exchange most of its long-term care pharmacy business for substantially all of Omnicare Inc.'s (OCR) home-infusion operations.
The swap comes as Walgreen determined it couldn't be a relevant enough player in the long-term care business "without significant additional investment." Meanwhile, Omnicare continues to build its drug-distribution business in the face of sharply lower second-quarter earnings and a raft of management changes, including the abrupt retirement of its chief executive.
Financial terms weren't disclosed.
Meanwhile, Walgreen has been remodeling stores to better appeal to customers, seeking ways to fuel front-end sales that had softened during the downturn. Like other drug stores, its pharmacy department has also faced pressure, as consumers cut back on doctor's visits, opt for generic drugs and buy medications in bulk.
But the pharmacy had a strong 5.1% increase in prescription volume last month, one-third due to a calendar shift. Half of Walgreen's overall same-store-sales growth was due to calendar impacts. That prescription growth far outpaced a decline reported Thursday by smaller rival Rite Aid Corp. (RAD).
By segment, Walgreen's August same-store sales rose 2.9% at the pharmacy and 0.7% at the front end. Generic drug introductions and lower flu incidence reduced the pharmacy figure by 2.9 percentage points.
Analysts had forecast overall same-store sales increasing 2.4%, rising 1.4% at the front end and 2.9% in the pharmacy.
Meanwhile, sales for the quarter ended Tuesday rose 7.6% to $16.89 billion as same-store sales increased 1.5%. Analysts polled by Thomson Reuters most recently forecast $16.8 billion. Full results are due Sept. 28.
As of Tuesday, Walgreen operated 8,053 locations, including 7,563 drug stores, 566 more than a year ago.
Shares of Walgreen and Omnicare were inactive premarket.
-By Matt Jarzemsky, Dow Jones Newswires; 212-416-2240; email@example.com