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Walgreens profit rises in Q2; unveils blockbuster partnership

BY Mike Troy

New York — Walgreens reported a better-than-expected profit on flat sales for its second quarter Tuesday morning and unveiled an expanded partnership with AmerisourceBergen that could give the pharmacy operator an equity position and seat on the drug wholesaler’s board.

Sales during the company’s second quarter ended Feb. 28, were flat at nearly $18.7 billion with samestore prescription sales down 2.7% and same-store front end sales down 2.6%. The prior-year comparison period included an extra day in February 2012. However, earnings per share adjusted to exclude several one-time charges increased 9% to 96 cents, three cents better than consensus forecasts, from 88 cents the prior year. Adjusted net income increased 19.3% to $915 million from $767 million.

"We are pleased with the quarter’s results as we saw substantial strength in our pharmacy performance, leading to strong earnings growth," said Walgreens president and CEO Greg Wasson. "With our Balance Rewards program now totaling more than 60 million enrollments, our preferred status with four national Medicare Part D plan sponsors and our very successful flu shot program this year, our customers are responding to our purpose to help them get, stay and live well."

Walgreen’s results continued to reflect the impact of increasing generic drug usage. The number of prescriptions filled at the company’s 8,072 stores during the quarter increased 6% to 208 million even though same store pharmacy sales declined. Walgreens said it grew its market share by 50 basis points to 19.2%. The company also noted that it administered seven million flu shots during the quarter compared to 5.5 million the prior year. Despite the gain, the company said fewer customers shopped its stores with traffic down 5.2% from the prior year. The decline was offset somewhat by a 2.8% increase in average transaction size.

In conjunction with the release of its financial results, Walgreens and its strategic partner Alliance Boots announced a sweeping new arrangement with AmerisourceBergen. Less than a year ago, Walgreens acquired a 45% stake in Alliance Boots and the companies announced a strategic partnership to create the first global, pharmacy-led health and wellbeing enterprise. Under the agreement the companies announced Tuesday morning, Walgreens will expand its existing relationship with AmerisourceBergen into a 10 year comprehensive primary distribution agreement for branded and generic pharmaceutical products. In addition, Walgreens and Alliance Boots will collaborate with AmerisourceBergen on global supply chain opportunities and will have rights to acquire a minority equity position in AmerisourceBergen that will give both companies one seat on the drug wholesaler’s board.

"Today’s announcement marks another step forward in establishing an unprecedented and efficient global pharmacy-led, health and wellbeing network, and achieving our vision of becoming the first choice in health and daily living for everyone in America and beyond," Wasson said. "We are excited to be expanding our existing relationship with AmerisourceBergen to a 10-year strategic long-term contract, representing another transformational step in the pharmaceutical supply chain. We believe this relationship will create a wide range of opportunities and innovations in the rapidly changing U.S. and global health care environment that we expect will benefit all of our stakeholders."

The deal will substantially alter how Walgreens sources prescription products. Currently, the company relies on AmerisourceBergen for specialty items, but the new deal is a 10 year comprehensive arrangement that for branded and generic pharmaceutical products. The portion of the agreement relating to branded products Walgreens has historically sourced from distributors and suppliers takes effect September 1. Over time, beginning in calendar year 2014, AmersourceBergen will increasingly provide generic pharmaceutical products that Walgreens historically has self-distributed.

It is believed the new relationship will enable Walgreens, Alliance Boots and AmerisourceBergen to benefit from greater scale and global opportunities and work together on programs to improve service levels and efficiencies, while reducing costs and increasing patient access to pharmaceuticals. The companies contend the arrangement will help address global health care challenges by making it easier for manufacturers to bring products to market; increasing accessibility to the benefits of global sourcing and best practices for community pharmacies; and providing patients with better access to health care. The collaboration is also believed to generate opportunities to attract partners in new markets and prospects in existing markets around the globe.

"We strongly believe that our new partnership with AmerisourceBergen will deliver long-term shareholder value by creating an unmatched network of companies that is well positioned to anticipate increasing market needs and expectations across the world," said Alliance Boots executive chairman Stefano Pessina. "Together we will bring tailored solutions to business partners, including manufacturers and pharmacists, as well as to patients and consumers."

AmerisourceBergn president and CEO Steven Collis called Walgreens and AmerisourceBergen undisputed leaders in health care and said the new arrangement would create unique opportunities to unlock value in the pharmaceutical supply chain.

"This new relationship will significantly strengthen and grow our core business and increase our ability to deliver innovative solutions to our customers, and long-term benefits to all of our stakeholders.  Importantly, these agreements not only expand our U.S. business, but also provide opportunities to meaningfully grow our specialty and manufacturer services businesses internationally," Collis said.

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Meijer supports small business, with Michigan-made initiative

BY CSA STAFF

GRAND RAPIDS, Mich. — Meijer has expanded its program that supports Michigan small businesses to feature 55 new Michigan-made grocery products in all its stores statewide, Meijer co-chairman Doug Meijer announced Tuesday.

"Meijer is committed to supporting Michigan businesses, and the Made in Michigan initiative is a great opportunity to highlight some fantastic small businesses throughout the state," Meijer said. "The response we received from our customers last year about this initiative was overwhelming, which is why we decided to further invest and expand this selection into all our Michigan stores."

Meijer launched the Made in Michigan initiative in January 2012 with the Michigan State University Product Center for Food-Ag-Bio. Its goal is to help strengthen the state’s economy by supporting Michigan small businesses. The initial offering of 49 grocery items – including marinara sauce, blueberry butter and gluten-free baking mixes – resulted in an estimated economic impact of $400,000 statewide.

This year’s lineup of 55 Michigan-made grocery products will be more visible in all of the 102 Meijer stores in Michigan. Items including barbeque sauces, cherry butter, salsas, guacamole and kettle chips are expected to have an estimated economic impact of $900,000 statewide said Matt Birbeck, High Impact Venture Action Team project manager for the MSU Product Center.

"It’s been a fantastic opportunity for all Michigan businesses to have this local section at Meijer; many of them see amazing results," Birbeck said. "Now that it’s in every Michigan Meijer store, everybody gets to see and taste the diversity of this great state."

Meijer worked with the MSU Product Center and its HI-VAT initiative to expand the program and ensure that all the suppliers had the right food protocols and supply chain procedures. The items are expected to remain on the shelves for a year, and will have an opportunity to branch out chain-wide. Of the initial items that were featured in 33 Meijer stores last year, a few products are under consideration to be mainstreamed onto the shelves as part of the retailer’s regular grocery offerings.

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Online retailer NoMoreRack receives $12M investment

BY CSA STAFF

NEW YORK — Online retailer NoMoreRack has announced its plans to expand their business and online presence. NoMoreRack has received $12 million in new capital. They plan to use this investment money to increase their workforce and expand into foreign markets.

The startup NoMoreRack has been in business since 2000 and has attracted a loyal and growing customer base. NoMoreRack recently announced, "We have attracted 7 million visitors a month to our site, we have 5.8 million subscribers, and we are selling on average 40,000 items per day. We are pleased to have reached a revenue of close to $80 million."

NoMoreRack offers customers discounts on brand name items. NoMoreRack customers never pay the retail price for anything found on the site. All NoMoreRack prices reflect a discount of 50-80%. All NoMoreRack products sold are accompanied by a 100% guarantee of authenticity. NoMoreRack finds great deals and always buys items directly from the manufacturer, retailer, licensed agent, or licensed importer. Eliminating all third parties during the procurement process allows NoMoreRack to pass along huge savings to their customers.

NoMoreRack’s online site is a visual delight that has great quality photos of all their items. NoMoreRack can be found at NoMoreRack.com. Item descriptions are thorough and provide customers with all the information they need to know. NoMoreRack hosts sales events that usually run for 24 hours. NoMoreRack also has events that sometimes last three to four days. The online retailer features seven categories of products including: women, men, home, jewelry, kids, lifestyle, and electronics. There are thousands of items available across these categories. There is an additional category called events that catalogs all the really big sales.

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