Walgreens Boots Alliance Inc (WBA)

[big-yank]

robb, I am so many years removed from Managerial Accounting class in college that I would never qualify as an expert on gift cards. My rough understanding is that GAAP have closed much of the variability in treating revenues from gift cards and the expenses innured from a customer cashing one in: both are credited to sales and expensed to COGS in the accounting period where the consumer redeemed a card for the purchase of goods/services. I believe that the major remaining gray area is how to treat uncashed giftcards, the "breakage" if you will. I think this is now in a state by state limbo where Consumer Protection Laws vary greatly depending on where you live. Again, I am no expert.

The good news is that if Walgreens lured significant Express Scripts Rx's back from other retail pharmacies in January using a $25 Gift Card as an incentive, only the revenue from the new Rx is reported for January's revenue. When the gift card is cashed in, say in February, both the $25 in additional revenue and the expense for it will go on the books.

The Gift Card incentive is a sound marketing tool. I can tell you that Verizon is presently offering a $300 Gift Card to Fios subscribers willing to change over from Infinity or other cable providers. Now THERE'S an expense to deal with at a later date!

I personally detest this type of gimmick, like mail-order rebates, but it is what it is... a high-cost promo that is easily copied by competition, usually is, and typically just degrades an entire industry's profitability when it becomes the norm.

We will see, over time.

GLTA,

Yank