Walgreens Boots Alliance Inc (WBA)

[big-yank]

There is an apparent dichotomy in the January numbers; some look really good, some seem contra-indicative to a spike in sales. I do think PC's point on recovery from Rite Aid is correct since the RAD shopping experience delivers much less than at either Walgreens or CVS, or even Walmart or Costco. The RAD Jan figures were tepid or anemic, if you prefer.

Part of the WAG January numbers are based on dollars, part are based on customer and Rx count. I am not going to attempt to break it all down since I would have to guess on some of it, but I will share my opinion on why the pharmacy numbers seem so high.

First, the flu shot counts as an Rx filled. A flu shot at $29.99 looks huge compared to an $8 Rx for Amoxycillin. Lots of flu shots = lots of pharmacy revenue. By the way, kudos to Walgreens for aggressively pursuing this business because the impact is obviously huge.

Second, the recovery of script volume from ESRX clients does not come without a price. All those $25 gift cards get charged off as expense items in the month they are redeemed. I believe that in WAG's accounting system such expenses are charged to SGA, though I would not bet my life on it. In any event, what seems really good news in the January comps may look more indigestable in the next Q's income statement.

All things considered, The January numbers were very solid, perhaps unexpectedly so, and the S/P action today confirms that this is the street view.

GLTA,

Yank