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NEW YORK — Front-end drug store sales are weakening, Credit Suisse reported Monday morning in a research note.
"Drug store front-end sales growth, as reported by Nielsen, weakened in the 4-week period ended July 6, as both pricing and volumes deteriorated sequentially," noted Ed Kelly, Credit Suisse research analyst. "Price/mix, which had been the sole driver of sales growth for the prior 4 periods, dipped to 2.1%, the lowest level since April 2012," Kelly added, which may signify increased promotional activity. While volume across health and beauty was down by 3.2% in the period, price/mix was up 3.6%. Similarly, volume was down 6.2% across general merchandise while price/mix was up 2.6%.
Kelly identified three root causes behind the weaker front-end performance — increased competition from value players in the mass and dollar channels, a continued economic weakness among consumers and uncompetitive pricing.
Promotional levels are up in year-ago comparisons. "The percentage of products sold on promotion in the drug store channel was 34.2% in the period, an increase of 72 basis points year-over-year," Kelly reported. Private label penetration was up 35 basis points in year-ago comparisons to 16.4%.
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