Walgreen eyes growth despite slowdown

CHICAGO (Reuters) - Walgreen Co (WAG.N) expects to increase its share of prescription sales even as anxious consumers rein in spending in the tough economic climate, said President and Chief Operating Officer Greg Wasson.

Walgreen, one of the largest U.S. drugstore chains, has seen consumers skip pills or split them in half to save on medication costs, especially with drugs used to treat chronic conditions such as high cholesterol, Wasson said at the Reuters Health Summit in New York on Wednesday.

Meanwhile, sales of Walgreen-brand aspirin, ibuprofen and other over-the-counter drugs are rising as consumers try to self-medicate rather than taking pricey trips to doctors.

"We're certainly seeing an anxious consumer, like everyone else is describing these days. We see them looking for more affordable essentials," Wasson said.

The company's stores are adding staff and stocking up on products such as milk, eggs and bread to appeal to shoppers who now tend to buy as soon as they get paychecks or public assistance checks, especially at the beginning of the month.

More of Walgreen's shoppers are also using cash rather than credit. Wasson said credit card use at its stores "fell off a cliff" six to eight weeks ago as the financial crisis worsened.

Walgreen had been seeing 15 percent to 16 percent growth in the use of credit cards, but now growth is in the single-digit range, Wasson said. He expects single-digit growth to continue through 2010.

Walgreen shares were down 1 percent at $23.46 in afternoon trading on the New York Stock Exchange.

THE RETURN OF THE PHARMACIST

In recent years Walgreen's business model has evolved mainly through acquisitions that brought in services such as clinics and at-home infusion treatments, making it more of a healthcare services provider. Still, its mainstay business is its drugstores.

The company is testing a plan in Florida where non-urgent prescriptions are filled at central locations, freeing up time for pharmacists to speak with consumers and provide services such as vaccinations.

Wasson thinks such programs can be part of a move toward more preventive medicine and disease management, especially if legislation providing affordable healthcare to millions of uninsured Americans in enacted during the administration of President-elect Barack Obama.

U.S. pharmaceutical sales have fallen slightly in recent months and are expected to grow just 1 percent to 2 percent in 2009, according to IMS Health Inc (RX.N).

Wasson said he expects Walgreen to continue to trend ahead of the IMS projection and grow its share of prescription sales.

Walgreen, which lost out to CVS Caremark Corp (CVS.N) in a bid to buy Longs Drug Stores Corp last month, sees acquisition opportunities in retail and healthcare and will be prudent and selective as it looks at possible deals, Wasson said.

Besides looking for deals as the retail industry consolidates, Wasson sees acquisition opportunities in areas such as specialty pharmacy, infusion, preventive medicine and disease management.

At the same time, Walgreen is cutting back on the number of items it sells so that consumers can make quicker decisions on what type of shampoo to buy, for example, and hopefully fill their bags with more than the average of just over three items purchased each time they go to the store.

Wasson declined to say how sales at stores open at least a year, or same-store sales, are faring so far in November. In October, Walgreen's same-store sales rose 2 percent, with pharmacy same-store sales up 2.8 percent and general merchandise same-store sales up 0.4 percent.

He is hopeful that consumers looking for less-expensive, last-minute holiday gifts will buy those items and holiday decorations in Walgreen stores.

"People may buy less or they may buy down, but they just don't ignore the holidays," Wasson said. "I would not want to be a high-end retailer today. I'm glad we're selling prescription drugs and toothpaste and low-end gifts."

(Reporting by Jessica Wohl; editing by Matthew Lewis and John Wallace)