Walgreen revives wine and beer sales
The company returns to wine and beer in hopes of boosting flagging sales.
Shares of Walgreen (WAG) were up 2.5% Wednesday to $32.82 on news that the company will start selling wine and beer again.
It's about time. Rivals CVS Caremark (CVS) and Rite Aid (RAD) sell wine and beer in many locations. Without those items, Walgreen became more of a drugstore and less of an all-around general store.
Analysts are applauding the move, saying it will help Walgreen recover some of the sales it lost in the recession. Sales at the front end of Walgreen stores dropped 2.6% in April, The Wall Street Journal reports.
The company will not place a big emphasis on wine and beer, and plans to devote only 2% of shelf space, the Journal reports. An analyst at Deutsche Bank told the newspaper that he expected to see an increase in the average customer bill, however, and a 2% bump in same-store sales.
Walgreen used to count on liquor for about 10% of its total sales revenue, the Journal reports. But the company pulled the bottles from its walls in the mid-1990s, saying liquor sections were too much of a pain to maintain.
Walgreen says it only expects wine and beer sales to be a small contributor to overall revenue, perhaps in the low single digits in the next three to five years, the Journal reports.
Another analyst placed a buy rating on Walgreen even before the wine and beer sales were announced, saying the company is on the right track with its strategy of simplifying its product mix and growing less aggressively, according to The Associated Press. Walgreen is cutting back on impulse items and emphasizing product staples, like food and toilet paper.
Like other drugstore chains, Walgreen is expected to see sales pick up soon as generic versions of drugs like Lipitor become widely available. The analyst, Tom Gallucci of Lazard, said he thinks Walgreen shares will jump 20% over the next year.
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John Stumpf acknowledges that growth has been slow, but he says he's still optimistic.
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