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CVS and Walgreens Could Get a Shot of Confidence

Flu Shot Campaigns May Boost Pharmacy Earnings

It may seem counterintuitive during a global health crisis when the headlines are full of pharmaceutical treatment news, but pharmacies themselves are struggling with depressed stock prices. Pharmacy giant Walgreens’ (WBA) stock has fallen by almost 38% so far in 2020 and competitor CVS Health’s (CVS) stock is down by 21%. However, flu shot promotions may just be the cure.

In an effort to boost sales, stocks, and foot traffic, both Walgreens and CVS are heavily promoting flu shots. According to the CDC, a record 200 million flu shots will be distributed this year. That’s 13% more shots given than during the 2019 flu season. For pharmacies administering flu shots, the extra numbers could translate into increased foot traffic. Customers who might have otherwise received their flu shots at work may head to one of CVS’ or Walgreens’ combined 20,000 American locations for a vaccine now that they’re working from home.

Customers Skip Discretionary Spending

Like many businesses during the pandemic, pharmacies have seen fewer customers in the past several months. For CVS and Walgreens, two companies that partly depend on sales of glasses, cosmetic products, and household goods, in addition to medications, less foot traffic translates to much smaller profit margins. In Q2 of this year, CVS announced non-prescription sales fell by 4.5%.

In an unfortunate pandemic twist, many people are also skipping routine doctor checkups. This means medical conditions are going undiagnosed, and fewer individuals are starting new prescriptions. For pharmacies, this is a challenge. Analysts at Mizuho Securities (MFG) estimate new prescriptions make up about 25% of total prescriptions at retail pharmacies like CVS and Walgreens.

Looking Ahead to COVID-19 Therapies

The increase in flu shot traffic may only last until the beginning of 2021, but if a COVID-19 vaccine follows, the boost may last longer. It’s likely the federal government will loop in retail pharmacies to distribute a COVID-19 vaccine, and many Americans may opt to get an approved vaccine.

Eventually, retail pharmacies may also benefit from the development of at-home COVID-19 tests and other virus-related products that could raise sales and reassure investors.

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