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Earnings surge in 2Q at Walgreens
March 22nd, 2011
DEERFIELD, Ill. – Walgreen Co. saw earnings rise by double digits in its fiscal 2011 second quarter and first half, lifted by robust revenue and same-store sales growth.
Walgreens said Tuesday that net earnings for the second quarter ended Feb. 28 came in at $739 million, or 80 cents per diluted share, up 10.4% from $669 million, or 68 cents per diluted share, a year earlier.
The results were in line with the average analyst estimate of 80 cents, according to Thomson Financial. Analysts' earnings-per-share projections for Walgreens' second quarter ranged from a low of 75 cents to a high of 85 cents.
As of morning trading on Tuesday, Walgreens shares were down about 7.3% to $38.94. The shares closed on Monday at $41.97.
Walgreens noted that the net earnings results for the 2011 second quarter reflect an impact of 1 cent per diluted share in restructuring and restructuring-related costs related to the company's Rewiring for Growth initiative, as well as an impact of 1 cent per diluted share in integration costs associated with the Duane Reade acquisition. Earnings results for the 2010 second quarter reflect an impact of 2 cents per diluted share in restructuring and restructuring-related costs from Rewiring for Growth, the drug store chain said.
On the revenue side, total sales in the 2011 second quarter climbed 8.9% to $18.50 billion from $16.99 billion a year ago. Comparable-store sales, which exclude Duane Reade, rose 4.1% year over year. Same-store sales in the front end gained 4.3%, while prescription sales in comparable stores were up 3.9%.
"We had another very solid quarter with record sales and strong cash flow as we turn our business strategies into results," Greg Wasson, president and chief executive officer of Walgreens, said in a statement. "Posting our third consecutive quarter of double-digit earnings per share growth, we're extremely focused on enhancing our full scope of services to become America's first choice for health and daily living needs."
In the pharmacy, Walgreens said it filled 205 million prescriptions in the second quarter, up 6.9% from a year earlier, while prescription sales rose 7.7%. The company reported that it exceeded the industry prescription growth rate (excluding itself) by 3.1 percentage points, according to IMS Health data, and that its retail prescription market share grew to 20.1% in the quarter.
"We achieved a milestone during the quarter by filling one of every five retail prescriptions for the first time in company history," Wasson stated. "Our front-end sales were led by great execution from our merchandising, marketing and operations teams, resulting in a strong holiday season in December and a strong Valentine's Day performance in February. A later onset to the cough, cold and flu season compared with a year ago also helped front-end comparable-store sales show solid increases for the quarter as both customer traffic and basket size increased."
For the first half of fiscal 2001, Walgreens' total sales increased 7.5% to a $35.85 billion from $33.35 billion in the prior-year period. Net earnings rose 13.9% to $1.32 billion, or $1.42 per diluted share, from $1.16 billion, or $1.17 per diluted share.
The company said first-half earnings reflect an impact of 1 cent per diluted share in restructuring and restructuring-related costs from Rewiring for Growth and 1 cent per diluted share in Duane Reade integration costs. A year ago, first-half earnings results included the impact of 5 cents per diluted share in restructuring and restructuring-related costs from Rewiring for Growth.
"We're confident we have the right strategies in place for our company to deliver sustainable growth," Wasson added. "Our center of gravity remains our nearly 7,700 drug stores, which are complemented by our specialty, infusion and mail pharmacy services, retail clinics, work-site health centers and medical facility pharmacies. We are also growing our multichannel offerings that provide customers what they want, when and where they want it. And we're doing this while keeping a sharp eye on costs, as we remain on track to deliver $1 billion in savings this fiscal year compared with our base year of fiscal 2008."
During the second quarter, Walgreens opened or acquired 48 new drug stores, compared with 41 a year earlier. The company projects organic store growth of 2.5% to 3% in fiscal 2011.
As of Feb. 28, Walgreens operated 7,690 drug stores nationally, including 127 medical facility pharmacies.