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Report: Pharmacy Business Will Continue to Drive Drug Store Channel Growth

COLUMBUS, Ohio -- The drug store channel over the past decade has demonstrated "remarkable resilience" amid a continued weak economy and intense competitive pressures, according to a new report by Retail Forward.

Sales growth in 2002 was largely attributable to booming prescription drug sales and moderate inflation, largely associated with rising drug prices, says the report, which was compiled by the global management consulting and market research firm.

Retail Forward's five-year forecast projects drug store sales to grow at a rate of 6.7 percent annually, or 3.5 percent after adjusting for inflation.

While projected growth is moderating from the oppressive 9.1 percent annual pace of the last five years, the drug store channel is in better shape today than it was a year ago, according to the report, which cites improved profits, restructuring activities, and higher gross margins as the key contributors to the sector's positive performance.

"It's a good time to be in the pharmacy business," commented Sandy Skrovan, Retail Forward v.p. and author of the company's recently released "Drug Channel Industry Outlook" report. "Pharmacy sales are growing at a feverish pace and forecasts call for double-digit gains in prescription drug sales over the next five years," Skrovan added.

Retail Forward's consumer shopping behavior data finds that drug stores remain the consumer's top choice for filling prescriptions. Looking ahead, players will continue exploring ways to move pharmacy beyond dispensing drugs into a new realm of integrated patient care and wellness initiatives, Skrovan said.

In contrast to the booming pharmacy business, the report says intense competition and pricing and margin pressures continue to threaten the drug store's front end categories, many of which are being infused with new marketing and merchandising programs designed to drive traffic and attract more customers.
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