SOURCE: Rothman Research

Rothman Research

June 21, 2010 08:39 ET

Sneak Peek in the Pharmacy and Drugs Retail Industry

JOHANNESBURG, SOUTH AFRICA--(Marketwire - June 21, 2010) - www.rothmanresearch.com - With the economic recovery continuing its snail-pace progression the drug stores industry is showing some mixed fundamentals. There are reasons to argue that the environment could be better for retail pharmacies and drug stores which stand to benefit from a number of factors an aging U.S. populace and the new healthcare law passed at the end of March which is set to open the door to opulence. However, according to the International council of Shopping Center Index for revenue at stores open at least a year was up by 2.6% in May 2010 for the retail sector as a whole. May for many retailers stood as an insipid month as indicated by revenues of some of the players in the drug retail space. Rite Aid Corp. (NYSE: RAD), one of the leading drugstore chains in the U.S. saw its May same-store sales in continuous freefall for the 12 successive month. Comps for May for Rite Aid's was down by 1.7% due to introduction of new generic drugs amongst others.

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One of the greatest challenges to the pharmacy and drugs retailers' sales growth in recent months have been the dive in new branded bestseller drugs whilst generic drugs have started flooding the market as a number of blockbuster propriety drugs lost their patent protections. The fierce competition between the different segments is also impacting revenue for smaller players as revealed by PharMerica Corporation (NYSE: PMC) first-quarter 2010 revenue decline from $468.2 million in the same time period in 2009 to $462.20 million. The company, however, managed to post a small surge of 2.4% in profit. 

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A major development in this industry at the moment is the bitter contention between two giants, CVS Caremark and Walgreen Co., which resulted in a loss-loss situation for both companies as they not only lost share-value in recent days but they both have given other industry rivals the opportunity to thrive on their weaknesses. Analysts have contemplated the possibility that an ongoing tug-of-war between those two companies will slowly benefit rival companies like Rite Aid, Medco and others. Additionally, these professionals believe that both companies have more to lose than to win in the short- to mid- term as sales would be impacted.

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