Key July revenue figure falls 7 pct for Walgreen

Walgreen Co. said Friday that a key revenue measurement fell 7 percent last month, as generic drugs and a split with Express Scripts continued to hurt the largest U.S. drugstore operator's top line.

The Deerfield, Ill., company's pharmacy revenue from stores open at least a year fell 9.7 percent, while sales from the front end, or rest of the store, dropped 2.4 percent compared to July 2011. The performance missed analyst expectations.

Analysts expected, on average, an overall drop of 5.8 percent, with an 8.4 percent decrease from the pharmacy and a 1.3 percent decline from the front end, according to Thomson Reuters.

Company shares fell 15 cents to $35.60 in premarket trading.

Revenue at stores open at least a year is considered a key indicator of retailer health because it leaves out results from locations that have opened or closed in the last year.

Walgreen used to fill prescriptions for St. Louis-based Express Scripts Holding Co., which runs prescription drug plans for employers, insurers and other customers as pharmacy benefits manager. But the companies let a contract between them expire at the end of last year, and Walgreen has said its revenue would slip.

Last month, the companies reached an agreement to resume doing business, but that doesn't start until Sept. 15.

Walgreen said Friday prescriptions processed by Express Scripts made up 12.7 percent of Walgreen's total for July 2011. Prescriptions filled at established locations fell more than 5 percent last month, and Walgreen said the absence of Express Scripts business was a key reason.

Generic drug introductions also hurt pharmacy sales. Popular drugs like the cholesterol fighter Lipitor and the antipsychotic Zyprexa lost U.S. patent protection from cheaper generic competition in the past year.

Generic drugs hurt pharmacy revenue because they cost less than brand-name products. But they help profitability because they provide a wider margin between the cost for the pharmacy to purchase the drugs and the reimbursement it receives.

Overall, Walgreen's July revenue fell 3.7 percent to $5.59 billion.

Walgreen has lost customers to competitors like CVS Caremark Corp. since its Express Scripts split, and Barclays analyst Meredith Adler said in a research note she expects Walgreen to recover only about half of the prescriptions it lost. She noted that CVS has said it expect to keep at least half the prescriptions it won from Walgreen during the Express Scripts dispute.

Walgreen opened 16 stores last month, including three relocations, and closed one. It operated 8,371 at the end of the month.