Credit Suisse: Front-end could prove challenging for drug channel

NEW YORK — According to a Credit Suisse analysis of the drug channel published Wednesday, drug stores are in for a challenging winter across the front-end with an embattled consumer continuing to hold back and the continued proliferation of dollar stores that are attracting value-driven trips to their channel. 

"Drug store front-end sales growth, as reported by Nielsen, decelerated in the 4-week period ended Oct. 26 on flat price/mix and weaker volumes," wrote Ed Kelly, Credit Suisse research analyst. "Industry sales were up 0.7% for the period, down from the [plus] 1.8% seen last month and the prior six-month average of [plus] 1%," he said. 

In addition to a lessening consumer demand, volumes are also being impacted by difficult year-ago comparisons. 

"We remain concerned about the continued lackluster sales trends seen in the channel and expect front-end results to remain challenged by continued consumer weakness, the channel's generally uncompetitive price position and increasing competition from value players," Kelly noted. 

While promotional levels across the drug channel are up vs. a year ago, they're down sequentially, Kelly observed. "Products sold on promotion in the drug store channel was 36.6% of sales, down 46 basis points from the 37% seen last month and up 226 basis points year-over-year."

 

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