The Reason Covid Shots Are Helping Pharmacies' Sales

People coming in for Covid shots are filling prescriptions and buying non-pharmacy items while they are at it, contributing to a significant rise in sales. JL 

Matt Grossman reports in the Wall Street Journal:

Vaccinations contributed last quarter to a recovery in Walgreens’s pharmacy operations and have helped support front-of-store sales, or sales of nonpharmacy items. Prescriptions filled rose by 9.8% in the latest quarter on a comparable basis, including a 6% contribution from Covid-19 vaccines. Improved store traffic played a part in 1.7% comparable growth in retail sales.

Walgreen Boots Alliance's role in administering Covid-19 vaccines helped lift its sales and profit in the latest quarter, but the drugstore chain said Thursday it is expecting a sharp slowdown in shots this summer.

Walgreens, based in Deerfield, Ill., said it has now given more than 25 million Covid-19 vaccinations. Walk-in appointments, employer partnerships and mobile clinics have contributed to those efforts, Walgreens said.

On a conference call with analysts, Chief Financial Officer James Kehoe said that Walgreens’s role in vaccinations likely peaked in the March-to-May quarter. In June through August, the company expects to give about 7 million vaccinations, compared with about 17 million last quarter.

Shares fell 6% Thursday morning.

Vaccinations contributed last quarter to a recovery in Walgreens’s pharmacy operations and have helped support front-of-store sales, or sales of nonpharmacy items. Prescriptions filled rose by 9.8% in the latest quarter on a comparable basis, including a 6% contribution from Covid-19 vaccines. Improved store traffic played a part in 1.7% comparable growth in retail sales, the company said.

The U.S. vaccination campaign has cooled off in recent weeks as the Americans who were most eager to get the shots have largely been able to do so. Last week, the White House said that the country will fall short of President Biden’s goal for seven in 10 Americans to get at least one dose of vaccine by July 4. The goal has been met for people aged 30 and older.

Two-thirds of adults have now gotten at least one shot, according to the Centers for Disease Control and Prevention.

The vaccination rollout has helped pharmacy companies such as Walgreens and competitor CVS Health Corp. rebound from lost revenue earlier in the pandemic. The payments the companies get from the Centers for Medicare and Medicaid Services for administered shots rose this spring. Consumers who show up to drugstores for vaccines have also been buying other items while they are there.

Overall, Walgreens’s sales in the quarter that ended on May 31 rose to $34.03 billion, from $30.36 billion a year earlier. The company posted net earnings of $1.2 billion, or $1.38 a share, compared with a loss of $1.71 billion, or $1.95 a share, in the year-ago quarter.

Walgreens’s adjusted profit of $1.51 a share was ahead of the Wall Street analyst consensus estimate of $1.16 a share, according to FactSet.