Walgreens' Private Labels Boosts Margins

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June 28, 2011

Walgreens’ private label business is getting a boost from consumers due to continued economic pressures, according to Gregory Wasson, CEO and president.

Gregory Wasson

“Persistent high unemployment, a weak housing market, high fuel prices and inflation all put pressure on consumers,” Wassons told analysts during its third quarter conference call. “In response, we believe our customers are managing their overall spending by buying more [on promotion] and private brand items, as well as [we] continue to see the mix shift to consumables and nondiscretionary items.”

Walgreens’ gross margin as a percent of sales for the quarter was 28.1 percent, up from 27.6 percent in the same quarter last year, said Wade Miquelon, CFO and executive vice president.

Wade Miquelon

“Overall margins in the quarter were positively impacted by higher retail pharmacy margins as the effect of generic drug sales more than offset market-driven reimbursements, and front-end margins were driven by OTC drugs, beauty and personal care and several private label categories,” he noted.

Miquelon noted that the chain is feeling some inflationary impact, but it’s been manageable. “For the most part we plan on offsetting it through pricing,” he said. “We'll stay competitive on that since we have to, but we'll also be smart how we play our whole portfolio and drive things like private label even harder.

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