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Industry leaders no surprise.

NEW YORK -- For the third consecutive year CVS Caremark Corp., Walgreen Co. and Shoppers Drug Mart (SDM) continued to be the industry's top generators of income, net margin and return on investment.

In fact, the trio of giant drug retailers were the only publicly held drug chains to produce a bottom-line profit in 2009.

CVS Caremark, which continues to see its results bolstered by the March 2007 merger of the CVS Corp. drug chain and pharmacy benefits manager Caremark Rx Inc., reported $3.71 billion in income last year, following $3.34 billion in income in 2008 and $2.64 in 2007.

Meanwhile, Walgreens, which has been working diligently to make its operation more efficient, also saw its income increase from year to year, rising to $2.91 billion in 2009, up from $2.16 billion in 2008 and $2.04 billion in 2007.

SDM generated $579.4 million (Canadian) in income last year, up from $456.5 million in 2008 and $361.1 million in 2007.

SDM, however, continues to benefit from its franchise business platform, turning in the industry's highest net margins and highest return-on-investment figure.

The 1,219-store chain's 5.9% margin in 2009 continued its string of near 6% net margins, coming on the heels of a 6% net margin in 2008 and a 5.8% net margin in 2007.

And although SDM's 15.3 % return on investment was down from the 16.3% it turned in a year ago, it was still enough to catapult the company to the top of that list, supplanting perennial leader Walgreens, which saw its ROI fall from 16.8% in 2008 to 14% last year.

In gross margin, the metropolitan New York City chain Duane Reade Inc. remained at the head of the pack.

Its 31% gross margin continues the chain's steady improvement in this area from year to year. In 2008 Duane Reade turned in a 30.8% gross margin, a slight improvement from the 30.3% margin it saw in 2007.

With the 257-store chain set to become part of the Walgreens empire later this year, some industry watchers feel that Duane Reade's industry-leading gross margin could help Walgreens bolster its overall profitability, tightening the race between it and CVS for top honors in the gross margin area.

Industry leaders--2009

Net income (1)                     Net margin

CVS Caremark         $ 3.71 bil.   Shoppers Drug Mart   5.9%
Walgreens              2.91 bil.   CVS Caremark         3.8%
Shoppers Drug Mart    579.4 mil.   Walgreens            3.2%

Gross margin (2)           R-O-I (3)

Duane Reade        31.0%   Shoppers Drug Mart   15.3%
CVS Caremark       30.0%   Walgreens            14.0%
Walgreens          27.8%   CVS Caremark         10.4%

(1.) Fiscal year, including retail drug stores and other businesses.
All figures in U.S. dollars. SDM net income is converted from
Canadian dollars using the rate as of April 1, 2010.

(2.) Fiscal year. Reported margins are not necessarily comparable.
In many cases, gross margins take into account store occupancy
costs, warehousing, delivery and buying expenses. The margin stated
here for CVS Caremark is for retail pharmacy operations.

(3.) Fiscal year, based on year-end shareholder equity.

Source: Racher Press research.
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Title Annotation:State of the Industry/The Issues; CVS Caremark Corp.; Shoppers Drug Mart Ltd.; Walgreen Co.
Comment:Industry leaders no surprise.(State of the Industry/The Issues)(CVS Caremark Corp.)(Shoppers Drug Mart Ltd.)(Walgreen Co.)
Publication:Chain Drug Review
Article Type:Company rankings
Geographic Code:1USA
Date:Apr 26, 2010
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