After holding its own throughout this recession, leading drugstore chain Walgreen (NYSE: WAG) showed a modest sales increase in March. This included a 1.5% increase in year-over-year monthly same store sales with a 6.8% increase in total sales. While earnings have been slightly off the last year or so, as the chain has felt the sting of the recession, they haven't fallen like the earnings of large, general, non-drug retailers.

Historically Resilient
Historically, the medical or pharmaceutical sector has been fairly recessionary proof, but during the current recession it seems that consumers have even been cutting back on medical spending. So for Walgreen, this sales increase looks like a positive sign that earnings may start growing once again.

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Viral Retail Slump
It took the latest recessionary shock for retail drug stores to feel some of the pain. Walgreen's earnings for the last quarter were 65 cents a share, down from 69 cents a share for the same period a year ago. For the year 2008, Walgreen earned $2.17 a share, and analysts' consensus estimates for 2009 are slightly less, in the neighborhood of $2.04. While these earnings numbers are nothing like the continued falloff of retail department stores, it certainly shows the drugstore retailers aren't immune to the retail pressure. CVS Caremark (NYSE:CVS) is expected to even edge up in their earnings, with a projected $2.52 per share for 2009 compared to 2008's $2.44. The troubled RiteAid (NYSE:RAD) chain recently reported a massive $2.3 billion loss, $1.81 billion of which was a non-cash charge. The company has also faced great difficulty integrating its purchase of Eckerd stores and in revving up its profits. RAD's stock price has slipped to below a dollar.

Pharma's Strength Overflows
Pharmacy sales make up 66% of the total sales in Walgreen stores, indicating the strength of the pharmaceutical end of the business. While there has been the suggestion that consumers have even cut back on prescriptions and doctor visits during this recession, the pharmaceutical end of the business is now healthy and perhaps getting healthier.

Two companies that are not in the drugstore business but deal with pharmaceuticals by either distribution or wholesaling are Cardinal Health (NYSE:CAH) and McKesson Corp (NYSE:MCK). Cardinal is a distributor and a mail-order retailer, while McKesson is a wholesaler which also deals in related health and medical products. The earnings of these two companies have been robust and are expected to continue to grow at an even faster rate than the drugstores, because they have not been dragged down by the running of brick-and-mortar retail stores. Still, the drug part of the drugstores is what will continue to make Walgreen and CVS healthy. (For more, see Investing In The Healthcare Sector)

A Strong Player Going Forward
The bump up in March sales for Walgreen is a mild indicator that the company is successfully fighting through the headwinds of the recession, thanks in large part to the strength of its retail pharmaceutical base. If the economy finds any strength in the months ahead, this may bolster the retail aspects of Walgreen's non-drug business. For value investors, keep an eye on this solid retail drug chain and watch when it gathers sales followed by earnings momentum. This will confirm its long-term value, and the stock price should pick up from there. (For further reading, see Measuring The Medicine Makers.)