Drugstore chain Walgreen Co. (WAG: Quote) on Tuesday reported a decline in second-quarter profit, negatively impacted by its exit from Express Scripts network and the mildest start to the flu season in 29 years. Earnings and top line beat Street estimates.
Looking ahead, the company expects new generic drug introductions, including generic Lipitor, to increase its gross profit in the second half compared with that of the first half.
Commenting on the second quarter results, Walgreens President and CEO Greg Wasson said, "The front end of our stores continued to perform strongly and attract customers for their health and daily living needs. Our balanced promotional approach during the Christmas and holiday seasons led to profitable sales growth, and our convenience and neighborhood locations proved valuable during a mid-week holiday such as this year's Valentine's Day, which was strong."
In the second quarter, net earnings declined 7.7 percent to $683 million from $739 million a year ago. Earnings per share dropped a mere 2.5 percent to $0.78 from last year's $0.80 on lower share count. On average, 23 analysts polled by Thomson Reuters expected earnings per share of $0.77 for the quarter. Analysts' estimates typically exclude one-time items.
The latest quarter's results benefited from one extra day versus last year because of leap year. Meanwhile, the mild cough/cold and flu season negatively impacted earnings per share by 3 cents and the company's exit from Express Scripts Inc. pharmacy provider network as of January 1 impacted results by 7 cents per share.
According to the Centers for Disease Control and Prevention, flu shots administered at pharmacies and clinics this flu season through February 29 totaled 5.5 million, lower than 6.2 million a year ago.
Quarterly sales from the company's 8,290 stores edged up 0.8 percent to $18.65 billion from prior-year quarter's $18.50 billion, beating Wall Street analysts' consensus estimate of $18.52 billion.
Front-end comparable store sales, from stores those open at least a year, rose 2.1 percent in the second quarter, despite reduced pharmacy volume.
Customer traffic in comparable stores increased 0.7 percent and basket size increased 1.4 percent, while total sales in comparable stores decreased 1.5 percent.
In the quarter, prescription sales, which accounted for 61 percent of total sales, decreased 1.7 percent and prescription sales in comparable stores decreased 3.9 percent. The company filled 196 million prescriptions, a decrease of 4.2 percent over last year. Prescriptions filled in comparable stores decreased 4.9 percent.
Walgreen shares are adding $0.63 or 1.83 percent in pre-market activity, and currently trading at $35.
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by RTT Staff Writer
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