Consumer Preferences: Analysts’ Bets
Two reports show what consumers think and what financial analysts believe could be two different views. The truth, as always, is probably somewhere in between.
BIGresearch shows that a third of consumers polled head to Wal-Mart most often for health and beauty purchases. That’s followed by Target and CVS at 8.1 and 7.8 percent, respectively. Walgreens was edged out of the top three, but it gets the nod in prescription drug purchasing. This suggests that Walgreens has built a solid reputation at the prescription counter that is not always translating to the rest of the store.
Also, Walgreens’ hold on the prescription market grew in January, expanding in preference from 16.1 percent in January 2008 to 17.8 percent in this year’s study. BIGresearch said price is key in prescription drug outlet decisions.
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“For instance, we know that practical, budget-bound shoppers who switched their store for prescription drugs in the past year did so primarily based on high prices and the lack of a $4 generic program,” said Pam Goodfellow, senior analyst for BIGresearch.
Good news for Walgreens is that the chain has embarked on a major program to improve its stores and bring them up to speed. Beauty will be one category undoubtedly getting even more attention. With all of those consumers in the stores for prescriptions, the potential to convert shoppers is huge. There’s no doubt that Walgreens has an amazing beauty department with its consultants, but the stores in general could use an update for the future.
Seeking Alpha found the average monthly spending among Geezeo users fell 18 percent at Walgreens in January versus only a 4.92 percent drop at CVS. Seeking Alpha looked at three-month and 12-month trends and found that they believe CVS is better positioned in a recession. Seeking Alpha cited average CVS spending of $53.35 throughout January, up 17.2 percent from October and 16.4 from January 2008. But at Walgreens, the firm said, the average customer spent nearly 10 percent more in January versus the year prior. The last quarter has seen declines at Walgreens, Seeking Alpha said. The report concluded: “Looking at these facts side by side, CVS appears to be better positioned to handle the economic recession than its crosstown rival, so expect the firm to keep setting the pace.”
Both chains need to not only keep an eye on each other, but perhaps more important, make sure they stay strong against discounters who are already making deep inroads on the health and beauty care business and could do damage to pharmaceuticals and beauty, too.
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People, Place and Things
A few words with David Kennedy, president and chief executive officer of Revlon, announcing profits fell by 72.3 percent. The bottom line, however, improved for the full year and the beauty giant said it is better prepared to meet the challenges of the marketplace than it has been in “many years.”
Kennedy: “While we expect economic conditions and the retail sales environment to remain uncertain around the world, we believe we are better positioned than in many years to maximize our business results in light of these conditions.
“Overall during the year, we improved our operating margins, generated positive free cash flow and net income from continuing operations and improved our capital structure by reducing debt by $110 million.”
What’s In Store
NACDS Annual Meeting: Kathy Ireland, Joe Scarborough and Seal are on tap to date for the NACDS annual meeting, which will kick off April 17 in Palm Beach.
Valentine’s Day: People might be planning to spend less, but shoppers were out in force at a Walgreens drugstore the Thursday before Valentine’s Day. Although the greeting card aisles were the busiest, there were shoppers purchasing fragrances and a handful of women trying new mascaras, including Maybelline’s Stiletto.