Top stock to watch: Walgreen Co. (WAG), one of the top stocks in the drugstore chain industry, has risen more than 22% since the middle of July while its biggest rival, CVS, saw a 5.32% decline in share price. This performance also topped the 3.50% gain of the S&P 500 index during this period. Here are the highlights of the operations of the drugstore operator:
Walgreen, together with its subsidiaries, operates a drugstore chain in the United States. The Company provides prescription and non-prescription drugs, and general merchandise to customers in communities across America through drugstores, mail, telephone, and online. The company also provides specialty pharmacy services; customers infusion therapy services and clinical services.
Drugstore chain operators are currently in the face of extremely fierce competition, and even several points increase in costs can devour the net profits. Therefore, scale effect is of significant importance to drive down the cost of supply. Meanwhile, scale effect is beneficial for the maintenance of brands and the increase of user stickiness.
The number of drugstores of Walgreen grew rapidly over the decades; this mainly relied on new drugstore openings as well as a large number of acquisitions in recent years. From the first drugstore to the ninth, Walgreen spent 15 years; to grow the number from 9 to 1,000, it took the drugstore chain operator 50 years; only 10 years later, the number increased to 2000. In the year 2000, Walgreen had opened 3000 drugstores; over the recent 10 years, this figure has reached 7761. The drugstore number of Walgreen exceeded CVS who had completed several big acquisitions, and regained the first place. During this year, Walgreen has acquired over 200 drugstores, and 45% of the shares in the U.K. company Joint Boots. The giant is expecting to continue to increase acquisitions and enhance global expansion, in order to improve sales.
Walgreen is not just opening new shops, but good ones with excellent locations and big flow of customers. In addition, Walgreen’s drugshops also provide convenience to the customers, such as 24 hours services, Drive-through channels.
The benefit of opening new stores is the low integration cost; this can avoid the consumption of brand and cost, maintain consistent quality of services and offer customers the same shopping experience, and the most importantly, ensure that the stability of the company’s liability structure and cash flow, which are an important lifelines for a retail company. Walgreen has been carrying out lots of mergers and acquisitions, but these years also it also suffers from the pain of integration, and shut down a number of poor shops.
WAG stock price gained 0.58%, or $0.21, to $36.24 in the regular trading session on the New York Stock Exchange on August 8, 2012. The current WAG stock price is above its 50-day moving average of $31.82 and 200-day moving average of $33.07. The stock gained more than 22% since the middle of last month, making it the top stock of the drugstore chain industry. WAG stock price has a 52-week range between $28.53 and $37.61, and the latest closing price is just 3.64% off the high. Walgreen currently has a market cap of $31.11 billion.