Citi Comments On Walgreens Annual Shareholder Meeting

Walgreens WAG is optimistic as it moves through F2011 for three reasons: the CCR stores continue to gain traction; there is a significant opportunity to increase basket size with fresh food offerings; and the expansion of the 90-day at retail Rx program. Citi believes a weak consumer and competition from other value-oriented formats will continue to have a negative impact on FE sales. Additionally, the generic wave will have limited impact until F2013, making Rx SSS difficult past the 2010/11 flu season. According to Citi, the average WAG customer buys three items per visit. WAG is using fresh food to offer more choice to the consumer and increase the basket size. The company continues to work with its supply chain partners and with Duane Reade to improve assortment, fixturing, and shrink. Citi believes WAG will continue to expand its fresh food offering as it seeks out ways to increase basket size and take market share. WAG continues to seek out ways to expand its services and drive additional revenues. Also, they have included extra space in some stores that will allow them to ramp up retail clinics when the time is right. There is also the longer-term oppty. to use these as infusion centers. Citi has a Sell rating on WAG. WAG closed Wednesday at $41.20