Walgreen Co. (WAG), the nation’s largest retail drugstore by store count, is ending its 15-year prohibition on alcohol sales and will begin restocking shelves with beer and wine at about 3,100 locations nationwide. Rivals CVS Caremark (CVS) and Rite Aid Corp. (RAD) already sell booze themselves, so the move by Walgreens will put the retail chain on equal footing with its competitors on the alcohol sales front.
Up until the mid-1990s, most Walgreen stores allowed shoppers to pick up bottles of hard alcohol like vodka and whiskey and pushed the drug store chain to the top of America’s liquor retailer industry. Booze and other beverages accounted for about 10% of Walgreen sales. While initial plans don’t seem to be eyeing a massive push like this, there’s no denying that if the move is successful more Walgreen’s locations will offer alcoholic beverages – and boost the company’s bottom line.
Of course, liquor sales aren’t all upside. In fact, the reason Walgreens got out of the alcoholic beverage business is because liquor sections were cumbersome and took up valuable real estate, and maintaining the stock was too time consuming for staff. That’s probably why the initial run of alcohol sales will be limited to beer and wine and only feature a small selection.
Rival drugstore CVS and Rite Aid sell beer and wine in several of their stores, as do some grocery-store chains including Safeway (SWY) and Kroger (KR) among a host of others. CVS, for example, sells beer or other alcohol in more than half of its some 7,000 locations. Rite Aid peddles alcohol in nearly all of the states where it has locations.
It appears that Wall Street is raising its glass to the move. According the Wall Street Journal, a retail analyst at Deutsche Bank predicts an increase in customer receipts and a roughly 2% same-store sales by the time beer and wine is included in at least 5,000 WAG locations. Considering front-end sales for the drug store have been suffering — that is, receipts and sales not tied to prescription drugs and pharmacy revenue — every little bit helps. These non-prescription sales fell -2.6% at Walgreen locations in April.
As of this writing, Jeff Reeves did not own a position in any of the stocks mentioned here.
