Walgreen (NYSE: WAG), a major drugstore chain whose enemies include CVS Caremark (NYSE: CVS) and Rite-Aid (NYSE: RAD), is getting ready to report earnings for its first fiscal quarter on Monday, December 22. It's Christmas week. Will Walgreen bestow a gift of an earnings beat upon the market?
One thing's for sure: the market does not expect much from the drugstore. Wall Street expects flat performance in Q1. The bottom line should come in somewhere around $0.46 per share, the exact same amount that was booked last year. You know, you figure the company should be able to at least match expectations when the bar is set so low. But it might be tough. We all need access to prescriptions and over-the-counter medications every now and then, and on top of that, many people obviously require long-term drug regimens. So, we can see that the pharmacy part of the equation is somewhat resistant to recession. However, there isn't a pressing need for all the non-pharmacy items in a Walgreen location. You don't need to buy any of those cheap plastic toys, any of those blenders that don't work too well, any of the overpriced groceries, etc. This is where Walgreen has exposure to the weakening consumer. Indeed, the consumer is becoming more and more of a value Grinch as time goes on. People just don't want to pay any more than they have to.
When I covered Walgreen's last earnings missive to the market, I found that the company stumbled and reported a miss. This does shake my confidence about the impending report. Investors will definitely be looking at same-store revenues and comparing the prescription sales to the floor sales. I know, however, that it won't be an utterly terrible quarter. For that, you should seek out Rite-Aid whenever it is giving out quarterly numbers. Perhaps the cash-flow stats will turn out to be healthy as a horse. Operational cash flow was up 29% in the last fiscal year. When all else fails, management needs to show investors the cash. Let's hope that, come Monday, Walgreen will be able to show investors not only the cash, but a great bottom line as well ...
Disclosure: I don't own any company mentioned; positions can change without notice.
Why do we have a weak dollar?
Holiday hiring slow for retailers
Closing Bell: What sell-off? (AIG, ABK, EPR, MBI, JAVA, ORCL, ERTS)
