Turley Muller

Walgreen: Attractive Valuation and Growth Story

To Chungst,

I see what you are saying about the refilling online, I know all about it. I have 2 all-in-one inkjets. The indication pops up, and takes right to the ordering site. I never used it though. It really started to piss me off because, if the black was empty, or the color was empty it wouldn't let you print at all, and would send you to buy ink.

I couldn;t even print BW when color was low. On my older one it lets you print BW and when BW is empty you can print BW with the color cartridge even though it;s a waste. I hated be held hostage like that because the $$$ is all in the ink and that;s why the printers are so cheap, they make it back on recurring purchases of ink, which only last a a couple hundred pages.

I recommend, and what I did was buy laser printers. I have the 1320 BW and the 2840 color. The toner lasts about 5000 pages. Not holding me hostage.

Now that I rambled off topic, to proceed- WAG won't change peoples habits that buy online, but for those that go to cartridge world or similar places, they are the customers WAG will pick up if that add refilling. There at least 3 cartridge worlds (I know of) in Metro Memphis with plans to add up to five more , and there are at least 50 WAG stores. I don't think one can assume everyone buys or will buy ink online. In short, convenience means something different for everyone.

On the extrapolating WAG's past into the future, I don't think WAG will be able to duplicate its past performance. It's a good company and it's not going anywhere, but margins and growth will probably decline somewhat.

About premium locations- WAG relocates so many stores each year it's crazy. I am aware that areas change and traffic migrates, just as downtowns were center, then became ghost towns, and recently have resurged, especially in Memphis. So it's in constant flux.

Just recently WAG bought a church two blocks away from a location in a strip center. Location has been there I know at least 40 years and is premo premo.

Everyone is baffled why they are building two blocks away, I conjecture its so a big box like WMT cityscape store or Kroger, TGT pharmacy store doesn't move in. Get it before a competitor does, and the existing location is in a strip so it;s tough to modify the space.

WAG does a good job keeping up with community growth and decline and moving accordingly. I don;t expect great things, but it's a stalwart bluechip and should be bought when valuation is compelling.

Thanks for your kind comments. Congrats on your CFA designation. At least they have upped the offering dates twice a year for Level 1, I sure wish they held level 3 more than once a year.

Walgreen: Attractive Valuation and Growth Story

Chungst,

About the ink comment-The author has a point. I don't know where you live, but one of fastest growing and successful franchises recently is Cartridge World. What they do could be done in a walgreens and it makes sense.

Speaking of convenience ? so you mail off you cartridges How do they get refilled online? Good bit cheaper just replacing ink and not the whole hardware. Not to mention environmental concerns with disposing of cartridges - specifically toner .

Walgreens have premium locations. That is their strategy and competitive advantage.

Hard-pressed to find another company that is so meticulous on store location. WAG loves stores on a busy ass street - (highly visible) AND corners /backs up to residential- (very accessible).

WAG has proven for years people will pay a premium for convenience especially if they already are going to the pharmacy.

COST, WMT etc, those stores are all great, but where I live, and where maybe some of you do to, those stores are outside the city, in swarms of traffic, and parking lot so big u need GPS. Thus, it's not everyday that some one living in a city goes to COST or WMT. It be cool if I did though.

I wrote this back in Oct, and I a working on an update.
Take a look if it interests you.

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