Seidman Investment Portfolio Organization


Company: Walgreens Co.
Sector: Services (NYSE:WAG)

Fall '09 Sell Summary - By Will Hibler

WAG is expected to face increased competition from Walmart and a relatively streamlined and updated CVS/Caremark. Unlike their competitors, they have not partnered with a Pharmacy Benefit Manager, which are third party companies that work directly with employer health insurance plans to either funnel prescription traffic to certain retail pharmacies, or to siphon them off to their own mail order services.

Finally, no one in the industry is sure what effects the Health Care Reform bill will have on the retail pharmaceutical industry. As a result of these issues, WAG is not expected to continue the same strong growth pattern it has enjoyed in the past few years. My thesis is that there will be better performers both within the industry (CVS/Caremark) and completely outside the industry/sector.


Fall '09 Summary by Tracy Priefer

Walgreens was founded in 1901 and is headquartered in Deerfield, Illinois. WAG is one of the largest drug store chains in the U.S., based on sales and store count. WAG is the second largest chain store operator in the U.S. As of August 31, 2008, Walgreen operated 6,934 locations in 49 states, the District of Columbia, Puerto Rico, and Guam, up 15% from 5,997 a year earlier. 

Walgreens August sales increased by 6.8%, with pharmacy sales increasing 8.1%. Future sales growth is predicted at 7.5% due to expanding services in the southern regions with the joint venture of the Vanderbilt Medical Center. Walgreens has also signed a deal with Caterpillar for a direct prescription-drug purchase arrangement, with the future possibility of an integrated healthcare & pharmacy program.  The arrangement will be effective on January 1. 

Walgreens Take Care Clinics are expanding around the country to prevent losses with future health care legislative reforms that might otherwise cause a decline in profits.  The current economy, while not favorable to purchasing general merchandise, is offset by Walgreens pharmacy sales.

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