Due a deadlock with Express Scripts (ESRX), Walgreen (WAG) earnings tumbled during the second quarter. The good news is they beat analyst forecasts; the bad news is their prescription orders took a nose dive. The total number of prescriptions for Q2 was 196 million, down 4.2% from a year ago. Net sales came in descent; up about 1% to $18.7 billion which some would say needs to improve moving forward.
Walgreen is the largest chain of drugstores here in US, and posted Q2 earnings of $0.78/share which was a penny ahead of analysts, yet $0.02 lower than last year's Q2 earnings of $0.80. Walgreen CEO Greg Wasson said in a statement:
The front end of our stores continued to perform strongly and attract customers for their health and daily living needs. As we expected, the convenience and customer-focused selection of our front-end health and daily living products and services led to higher comparable store front-end sales in the quarter, despite reduced pharmacy volume.
If WAG wants to restore shareholder confidence it needs to hammer out a new contract with ESRX. They are losing considerable market share to both CVS Caremark (CVS) and Rite Aid (RAD), who have clearly gained more customers by accepting patients enrolled in the ESRX plan.
Investors should short WAG in the near term if a contract isn't hashed out soon. They will continue to lose much needed market share, and in turn continue to have disappointing quarters.