--Acquisition of regional drugstore chain may signal Walgreen's
commitment to the competitive domestic market
--Walgreen's same-store sales slid 10%, worst monthly decline in
2012
--Same-store sales have slumped each month in 2012, since
Walgreen allowed a contract with Express Scripts to expire
(Adds background, June same-store sales data and the latest
stock quote, in the second through 10th paragraphs.)
By John Kell
Walgreen Co. (WAG) agreed to pay about $438 million to acquire a
regional drugstore chain from Stephen L. LaFrance Holdings Inc. and
members of the LaFrance family in a push to expand its presence to
smaller communities in the mid-South.
The acquisition of a domestic chain that recorded $825 million
in sales last year came after Walgreen last month agreed to pay
$6.7 billion to buy a 45% stake in U.K. pharmacy-led
health-and-beauty retailer Alliance Boots GmbH, a deal that
concerned some observers as a strategic shift away from Walgreen's
home market.
Thursday's deal includes 144 stores currently operated under the
USA Drug, Super D Drug, May's Drug, Med-X and Drug Warehouse names.
The acquisition also includes corporate offices, a distribution
center in Pine Bluff, Ark., and a wholesale and private-brand
business.
Walgreen's acquisition of the regional drugstore chain may
signal to some the company's commitment to the competitive U.S.
retail market, with Walgreen Chief Executive Greg Wasson saying his
company could leverage "the Walgreen experience to many additional
smaller communities where USA Drug has developed strong operational
expertise."
Walgreen's woes in the U.S. market continued Thursday, when the
company reported same-store sales slid 10% in June, the worst
monthly decline this year, as prescription-drug sales were battered
by the drugstore chain's exit from pharmacy-benefit manager Express
Scripts Holding Co.'s (ESRX) network.
Same-store pharmacy sales dropped 15%, also the worst decline on
that metric this year, as results were hurt by the loss of Express
Scripts clients, generic-drug introductions and a calendar shift.
Front-end same-store sales slid 1%.
Walgreen's overall same-store sales have slumped each month in
2012, ever since the company allowed a contract with Express
Scripts to expire, resulting in some clients going elsewhere to
fill their prescriptions. The industry has also broadly been hurt
by strong demand for new generic drugs hitting the market, as they
carry lower prices than branded products.
The deal disclosed Thursday is the latest in a string of
acquisitions by Walgreen. In May, the company completed a $225
million acquisition of specialty and mail-service pharmacy
operations from BioScrip Inc. (BIOS). Other recent acquisitions
include the purchase of online retailer Drugstore.com Inc. and New
York drugstore chain Duane Reade Inc.
The deal for the regional drugstore chain is expected to close
around Sept. 1, and Walgreen doesn't expect the transaction to have
a material effect on fiscal full-year earnings. The stores are
located in Arkansas, Kansas, Mississippi, Missouri, New Jersey,
Oklahoma and Tennessee. The acquired drugstores will continue to
operate under their current brand names after the transaction
closes.
Walgreen shares were down 0.5% to $29.47 in recent trading.
--Saabira Chaudhuri contributed to this article.
Write to John Kell at john.kell@dowjones.com.