Heady, Boozy Days for Walgreens (and Its Stock)

By Joel Reese

Wednesday was a big day for Walgreens, the nationwide drugstore chain that’s about as ubiquitous in Chicago as doughy-faced traffic cops handing out parking tickets.

For starters, the 108-year-old company finally got out of the 1920s and announced it will allow alcohol sales.

This is great news: Now you can get a case of beer with your overpriced gift-wrap.

I kid, I kid.

Walgreens is making this move to stay up with the cutthroat world of drugstores (who knew?): Everyone from CVS to Target to Wal-Mart is trying to get in on this market. (And these other stores sell hooch, by the way.) Walgreens is shaking up everything to stay competitive — according to this article in the Chicago Tribune, Walgreens will be ditching the Chia Pet at its 7,000-plus stores and and adding staples like more toilet paper and toothpaste.

And, apparently, booze (i.e., beer and wine).

Personally, this doesn’t affect me that much — I usually have enough alcohol on-hand that I won’t need to go to Walgreens for an emergency bottle of pinot noir. (This is my favorite brand lately, btw — great subtle cherry taste, and it’s only $11 a bottle or so.) But I’m glad Walgreens is abandoning a silly, borderline puritanical stance, for whatever reason.

So boozehounds will be able to their special sauce at Walgreens. Good for them. But this move probably won’t affect the company’s bottom line too much: the plan is for liquor to take up about 1 percent of the the typical store’s shelf space.

Speaking of self-medicating, prescription drug sales have a bigger impact on Walgreens sales, which have been up lately. Sales at stores open at least one year climbed 2.4 percent, with prescription drug sales climbing 9 percent (which is how much Walgreens shares jumped after the company’s earnings bested analysts’ expectations). All told, the company is up 39 percent this year, the Wall Street Journal noted.

So here’s the question: How will Walgreens do going forward? Maybe selling beer and wine will bring in more people, but Walgreens has pretty much achieved market saturation. So they’re slowing new-store construction, but concentrating on improving/streamlining their current stores. Can they improve sales enough to continue their surprising stock growth?

And more importantly: Will you head to Walgreens to buy your booze?

How to Profit Off Your Pooch

By Joel Reese, WeSeed

The recession has hit almost everyone pretty hard.

Wait, scratch that — it’s hit almost every person hard. Dogs, cats, and other pets are doing quite well these days.

Americans will spend roughly $45.4 billion on their pets this year, estimates the American Pets Association. (That’s up $2.2 billion from last year, the group notes.)

And this goes beyond your dog’s Derm Care Anti-Bacterial Medicated shampoo ($14.99), or your cat’s argyle sweater ($35), or your dog’s hand-painted blue dress with strawberries ($59.95). We’re talking doggie spas, pet insurance, veterinary bills that make your elective appendectomy look cheap, and things like this German custom-built cat condo ($1,034).

Meanwhile, just for fun, we’ll note that luxury store Saks Fifth Avenue (SKS) posted a 15 percent sales loss compared to last year, which is pretty much the standard trend in retail.

So enough about that — which companies will profit from people’s peculiar pet preferences? To my mind, this brings to mind another axiom: If you want to strike it rich during a gold rush, invest in picks and shovels. The point: So who services pets?

The first company that comes to mind is PetSmart (PETM) — you’d think that stock would be shooting through the woof, right?  At first, it seems the company is barking up the wrong tree. Even though the market’s dog days are starting to turn around, the stock has gone from $35 per share last year to about $21 per share today. (Ok, I’ll stop with the pet puns. It’s just so doggone tempting!)

But according to this Motley Fool story, PetSmart is actually doing pretty well: earnings were up 4.6 percent last quarter, and sales were up some 5 percent. So even though other companies are trying to creep into the pet market — Amazon (AMZN) and Target (TGT) come to mind — PetSmart is still a player here.

If PetSmart’s numbers frighten you, there are other companies taking advantage of this four-legged friend fervor. PetMed Express (PETS), which sells prescription drugs for Fido and friends, is at around $18, up from $11 a little over a year ago. The company’s ROC (return on capital, which is basically a way to tell how effectively a company is using its money) is a strong 31 percent over the last three years, and they tap into a potentially burgeoning market: The company can undersell vets via their 1-800-PETMEDS, who aren’t usually interested in passing along bargains to pet owners.

Then there’s Patterson Companies (PDCO), which makes veterinary supplies, is at $27 per share, up from below $17 just a few months ago. The Minnesota-based company has seen an increase in sales and gross operating profit over the last four years.

The lesson here: follow the crowds, and right now the crowds are making their pets happy. So maybe you should put your money where your leash is and let Fido guide your finances. Just a thought.

image by Tobyotter

Target’s Board Is in the Crosshairs

by Carlos Portocarrero, WeSeed Writer

Let’s say you’re a big fan of Target (TGT). You love their stores and you love their prices. You also think the people in charge of the company are doing a great job, so you buy some stock because you want to get in on their action.

Then you decide it’s not enough—you want to make it even better. So you start a petition to change some of the people on the board of directors.

Why? Because you think some fresh blood would do the company good.

That would make you this guy: William Ackman. Ackman’s Pershing Square Capital Management owns over $1 billion worth of stock, which makes it one of the largest shareholders in the company. Which is why his opinion matters at all.

Here’s what Ackman wants: some of his people on the board. He’s saying that the current board members don’t have enough experience with credit cards, real estate, or retailing.

Board members don’t really have much power, they just kind of oversee what’s happening in the company and raise their hands if they think something isn’t ok.

But wait—credit cards? Yup—that’s because those Target Cards actually function like credit cards, and that’s part of Target’s business. Same with real estate—they own the land underneath the stores.

If you or I thought Target should change its logo to something ridiculous like a green bell pepper, we’d be laughed out of the room. But if we owned most of the shares….that would be different.

What do you think about someone saying all these great things about the company… and then trying to change them? Is he getting too greedy or is he just trying to get Target’s stock price out of its 2004 levels?