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Drugstore Stocks Under the Weather

Walgreen, CVS and Rite Aid slide after posting sluggish sales.
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Drugstore stocks were sliding Thursday after big chains CVS Caremark (CVS) - Get CVS Health Corporation Report, Walgreen (WAG) and Rite Aid (RAD) - Get Rite Aid Corporation Report posted December sales that were viewed as sickly.

Shares of CVS were slipping $2.36, or 6%, to $36.99, while Walgreen was down $2.22, or 6%, to $35.12. Rite Aid was down 18 cents, or 6.7%, to $2.51.

CVS posted a 1.8% rise in same-store sales, or sales at stores open at least a year, for its retail division. The company said the results were lighter than expected because of bad weather in the early part of the month, a slowly developing flu season and tough economic conditions.

Cramer: Why I'm Buying CVS

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Front-end same-store sales increased 0.6%. Pharmacy same-store sales rose 2.4%, with recent generic-drug introductions cutting the figures by 470 basis points, CVS said.

Nonetheless, CVS said it expects 2007 earnings of $1.91 to $1.92 a share, at the high end of its prior guidance of $1.89 to $1.92. For the fourth quarter, the company projects earnings of 54 cents to 55 cents a share.

Analysts polled by Thomson Financial predict earnings of 55 cents a share for the quarter and $1.92 a share for the year.

The company, which also operates the Caremark pharmacy-benefit manager business, attributed the rosier profit outlook to favorable operating expenses and improved margins.

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Meanwhile, CVS' chief rival, Walgreen, reported a 2.6% rise in December same-store sales. That's the smallest monthly increase since at least 1990,



Walgreen's pharmacy same-store sales rose 3.3%, accounting for 57.3% of total sales, and front-end same-store sales increased 1.7%.

Walgreen said generic-drug introductions lowered pharmacy same-store sales by 4.4 percentage points. December sales also were hurt by weakness in seasonal categories, the withdrawal from the market and cautions on the use of cough and cold products for children, and aggressive pricing on digital photo prints, Walgreen said.

Rite Aid's same-store sales dropped 0.5% for the month. Pharmacy same-store sales were flat, while front-end same-store sales declined 1.2%.

Rite Aid, the smallest of the three major chains, has been struggling with slow sales and a massive acquisition last year of Brooks Eckerd. The company last month posted a

hefty loss for the third quarter that was much worse than expected, sending shares down 32% in one day.

This article was written by a staff member of