Walgreen Company(NYSE: WAG) recently announced same-store sales of 3.5% in March. The company credits higher pharmacy sales for the success. In fact, same-store sales rose 8% in the pharmacy section at Walgreen and accounted for 65% of the company's total sales in March.
Pharmacy is just one of the new strategies retailers are implementing to grow same-store sales, an indicator used by investment analysts to measure year-over-year sales growth. In addition to pharmacy, customer financing, and smaller stores are strategies retailers like Conn's(NASDAQ: CONN), and Wal-Mart (NYSE: WMT) are using as a way to maintain and grow market share.
Customer financing Conn's is a specialty retailer that operates in approximately 75 locations. The company sells home appliances, furniture, consumer electronics, and home office equipment. It is Conn's in-house credit option and third-party financing programs for rent-to-own payments that set it apart from its peers. These plans have enabled the company to increase earnings by 38% to $1.19 billion on same-store sales growth of 26.5%.
Smaller stores Some large-box retailers are opening more smaller store formats as a way to grow same-store sales. Smaller stores are located in more convenient locations and they provide customers with an assortment of food and other basic consumables, which is a high growth area in the discount retail sector.
After reporting a decline is same-store sales of 0.4% in 2013, Wal-Mart announced a planned expansion of its small store format to 270-300 this year.."We remain encouraged about the performance of our Neighborhood Markets, opening an additional 17 units across the country in the fourth quarter alone", said William S. Simon, President and Executive Vice President of Wal-Mart U.S. on the last earnings call. "The format maintained its consistent performance driving mid single-digit comps and positive traffic for the year." In addition to Neighborhood Markets, Wal-Mart is also opening Express formats, which is an even smaller store format. According to the earnings call, these formats are delivering double-digit same-store sales growth.
Takeaway The retail sector is undergoing a major transformation and as retailers jockey for position in a competitive marketplace they are increasingly counting on pharmacy, customer financing and smaller-stores to help grow market share. Each of these strategies is aimed at driving sales by focusing on the needs of the customer.
Pharmacy is a high growth area due to the Affordable Care Act; rent-to-own provides a way for credit strapped customers to purchase higher priced items; and, smaller stores give customers more options to shop without cannibalizing current market share. The degree to which each of these retailers can implement these strategies will dictate how successful they will be in the long-term.
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