Investing: Walgreen faces intense competition as it expands
Question: I am a longtime holder of Walgreen Co. stock and would like to know where the company is headed.
Answer: The largest U.S. drugstore chain by number of locations faces a future of intense competition from discount retailers, mail-order pharmacies and rival drugstore operators.
Nonetheless, Walgreen maintains strong brand recognition, with 8,065 Walgreens stores in the U.S., some with in-store health clinics. The company also operates a network of work-site health centers.
The company has lately focused on cost cutting, growing its healthcare service offerings and renovating its stores. It plans considerable store expansion, based in part on the likelihood that healthcare spending will increase as the population ages.
Investors must weigh the company’s significant competitive pressures against its proven long-term strengths and ability to adapt to changing conditions.
Prescription drugs account for about two-thirds of the firm’s sales. In the fiscal year that ended Aug. 31, the company earned $2 billion on sales of $67.4 billion.
Profit in its fourth quarter rose 8% on higher prescription-drug sales and successful promotions of nonpharmacy items such as packaged foods, greeting cards, photo finishing, and household and personal-care products.
Walgreen has benefited from an increase in influenza vaccinations in the last year, even selling flu-shot gift cards to expand that profit center and increase the store traffic that accompanies it.
The Deerfield, Ill., company agreed in September to buy 18 ApothecaryRx pharmacies from Graymark Healthcare Inc. after acquiring New York drugstore chain Duane Reade in April.
The largest provider of home-infusion services delivering intravenous medications, Walgreen is exchanging its long-term-care pharmacy operation for Omnicare Inc.’s home-infusion business.
Walgreen is seeking a buyer for its pharmacy benefits management business.
Shares of Walgreen are down 4.3% year to date after climbing 49% in 2009. The company has raised its dividend 35 years in a row.
Wall Street analyst recommendations on Walgreen stock include six “strong buy” ratings, seven “buy” ratings, 10 “hold,” one “underperform” and one “sell,” according to Thomson Reuters.
Emerging-market funds can swing
Question: I would like to invest in emerging markets for the first time, and wonder if Oppenheimer Developing Markets Fund would be a good choice.
Answer: If you’re a first-time investor in emerging markets, be prepared for some significant fluctuations.
The $19.6-billion Oppenheimer Developing Markets Fund earned a total return of 33% in the last 12 months. In the last three years, the fund returned 5.2%, ranking in the top 2% of emerging-market funds.
Nearly half of its holdings are in Asia. More than one-fourth are in Latin America.
Financial services is its largest sector concentration, followed by industrial materials, telecommunications and energy.
The fund has an annual expense ratio of 1.35% and requires a $1,000 minimum initial investment. There is no sales charge on share purchases.
Andrew Leckey answers questions only through the column. E-mail him at yourmoney@tribune.com.
