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Sales, earnings down in 3Q at Walgreens
June 19th, 2012
DEERFIELD, Ill. – The same day it unveiled a blockbuster partnership with global pharmacy, health and beauty retailer and wholesaler Alliance Boots, Walgreen Co. reported declined sales and earnings for its fiscal 2012 third quarter.
Walgreens also said Tuesday that earnings in the quarter, which were in line with Wall Street's forecast, reflect a negative impact of 1 cent per diluted share from the deal with Alliance Boots, in which the U.S. drug chain is buying a 45% ownership stake and has the option to acquire the other 55% of the company later on.
Net income for the third quarter came in at $537 million, or 62 cents per diluted share, compared with $603 million, or 65 cents per diluted share, a year earlier, according to Walgreens. The earnings result includes a negative impact of 6 cents per diluted share net of cost controls from no longer being part of the Express Scripts Inc. pharmacy network, due to the drug chain's contract impasse with the pharmacy benefit manager.
Financial analysts, on average, had projected earnings of 62 cents per share, with estimates ranging from a low of 58 cents to a high of 67 cents, according to Thomson Financial.
Third-quarter sales fell 3.4% to $17.8 billion from $18.4 billion in the prior-year period, Walgreens said. Same-store sales in the quarter decreased 6.6%, reflecting declines of 0.9% in the front end and 9.9% in the pharmacy. Customer traffic in comparable stores was down 2.6%, but basket size grew 1.7%.
"By focusing on our key strategies, we are positioning ourselves to be the first choice for health and daily living," Walgreens president and chief executive officer Greg Wasson said in a statement. "We continue to learn from our 200 pilot Well Experience format stores, including some Duane Reade locations in New York City. We also continue to advance the role of community pharmacy by expanding our pharmacy, health and wellness services and deepening relationships with a number of partners."
Overall prescription sales, which accounted for 62.9% of Walgreens' total revenue in the quarter, declined 6.6%. The company said it filled 192 million prescriptions in the quarter, down 8.4% from a year earlier. Prescriptions filled in comparable stores decreased 9.1%.
"During the current pharmacy benefit selling season, we're pleased with the very favorable response we are hearing from plans, payers and benefits consultants to the value that Walgreens brings to employers and patients," Wasson stated.
For the nine months ended May 31, total sales edged up 0.6% to $54.6 billion, Walgreens reported. Net earnings for the nine-month period were $1.77 billion, or $2.03 per diluted share, down from $1.92 billion, or $2.07 per diluted share, a year ago.
As of May 31, Walgreens operated 7,890 drug stores nationwide, 175 more than a year ago.
Also on Tuesday, Walgreens announced what it said was the largest quarterly dividend in the company's history. The drug chain raised the quarterly dividend 22.2% to 27.5 cents per share from the prior rate of 22.5 cents per share.
The company noted that it has previously stated its goal of a long-term dividend payout target of 30% to 35% of net earnings. Over the past five years, its annual dividend rate has climbed from 38 cents per share to $1.10 per share, resulting in a compound annual growth rate of nearly 24%.