Downturn or No, Drugstore Stocks Look Expensive

Stocks in drugstore chains have been a good bet of late, as they typically are when the economy stumbles, on the theory that even in uncertain economic times people will still tend to their health.

Yet customers at so-called drugstores nowadays are more likely to be on the hunt for a light bulb or a bag of pretzels than a new prescription. Indeed, these so-called front-end goods now make up about 75% of profits at the nation's drugstore chains, says Eric Brosshard, an analyst at Midwest Research, an independent firm with no investment banking business. With general merchandise items at drugstore chains considerably more expensive than those sold in supermarkets or discount department stores, some people are wondering just how recession-proof drugstore stocks are.

"Drugstores are not impervious to a falling economy," Brosshard says.

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