b00stn

What are you opinions on Walgreens (WAG)?

sahtt

It would probably be more productive if you stated why you like the stock besides that it's beaten down. Everything is beaten down besides a handful of stocks.

b00stn

sorry, company seems well managed, low debt historically, 34 consecutive years of record earnings, recently been heavily investing in expansion but done so while keeping debt at a minimum, lowest the stock has been in about 8 years and looks like there is room to grow once some of the new stores starting generating profits. Rx sales which is 2/3 of business has been flat in recent years most likely due to tough economic times but should like change once the economy straightens out. Also with baby boomers looming on the horizon, future sales should be strong due to high rx use in this population. thoughts?

sahtt

Sounds good to me. What about versus CVS etc.? Are they going to have to take market share or is there still room to grow in that sector?

b00stn

Market share is definately important and both companies (CVS and Walgreens) show acknowledgment of that given their aggressive growth strategies. On that point, WAG looks attractive to me for two reasons. One is they have managed to keep their debt low while aggresively adding new stores and the new stores added are stores built from scratch in locations they have chosen. Contrast this to CVS (their closest competitor) which has also been expanding aggresively, but with a strategy that involves substantial debt and store growth by aquisition. The problem with aquisitions in my eyes is (a) you have no say of where the stores were placed (very important in a field where convenience is king) and (b) you aquire all their previous financial moves, good and bad.

The RX sales that are currently flat will undoubtedly increase when one of two things happens. Either the economy improves and people start taking their medications again or the swelling number of baby boomers (on average, they fill 30 rx's a year) will drive up sales. If both happen, all the better.

My main reason for thinking the stock is currently in an attractive spot is that WAG has been aggresively adding new stores but done so with low debt. But all the new stores are too young still to really show profits which will simply take some time. Once that happens along with a shift in the economy / baby boomers, they will be in a good position to make some good profits.

I guess my main question would be what are the negatives that you guys see. I know Government spending cuts to medicare/medicaid programs are always a concern given the high numbers of rx's these groups use. What else do I need to consider in my risk assumptions.

jah

since buying condems online i have not been in a Walgreens in years.
what is it like, so when you walk into a Walgreens do you see anything you want to buy?

GPMike

Walmart will put all the major drug peddler retailers out of business in the next decade...that is just my opinion. Do not base your investing off anything I say. Have a nice day.

martha

Having had a Rx filled at WalMart I'm not so sure about that position. When WalMart first came out with the $4 generics, granted they drew business away from all other drug stores. But with others matching the price, I think this will change. I think people will get tired of the horrendously long lines to pick up Rx's at WalMart and go back to the convenience of the "local" Walgreen's or CVS. But that's purely opinion. It's not a scientific sampling and certainly nothing to base a stock purchase on. We may just have the world's most inefficient WalMart.

mingster

i've been selling to retail (CPG product manager) for many years and my opinion is that there's a reason why the likes of CVS & WG are successful with their carving of a niche retail slice against the onslaught of WM in many areas, most notably is the overhead structure, margin requirements for their merchandise, and number of stores. not saying that WM isn't taking shares of the drugs away, but there are plenty of other merchandises in the stores they make money on, and because of their locations (where many WM aren't available) people are more willing to pay a slight premium for last minute needs like eggs, milk, candies, sunglasses, etc.

however for the OP i would advise against buying into any retailers at this point.

AssassinJN

One point against walmart taking cvs, wg and the like out of the picture would be pharmacist relations. A number of people go to the same pharmacist throughout their lives (at while they live at the same place) since they are then more efficiently able to keep track of their different prescriptions in the case of any bad interactions between them. Now with most medical retailers joining a since database that can warn them of such complications this is becoming less of an issue, but still something that many people practice.

As it stands now, cvs has seen less of a hit during this downturn, but not by much. Rite-aid is another player that you should keep track of when deciding on this purchase, they have been slightly more volatile as of lately due to very poor earnings and a management turnover and purchase. Lately they had been rolling out a new store layout/makeover that has seen a decent increase of price that landed me a decent return a few months ago.

I would have to agree, however, that this is not the time to buy any of these. With the slightly higher gas prices (not so much an issue now, but still on the minds of most americans) and drop in finances, online vending of drugs will put an even bigger dent (it has been a significant factor in a decline in all of these stores) as they offer reduced rates and the ability to order and receive without leaving the home.