Walgreen Co. reported a surge in earnings and record sales for its 2013 fiscal year, fueled in part by a strong fourth quarter.

Walgreens, fiscal 2013, fourth quarter, sales, revenue, same-store sales, net earnings, prescription sales, prescriptions filled, Greg Wasson, comparable stores, customer traffic, basket size, prescription market share, Alliance Boots, AmerisourceBergen, drug stores, drug chain

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Walgreens reports robust results for fiscal 2013

October 1st, 2013

DEERFIELD, Ill. – Walgreen Co. reported a surge in earnings and record sales for its 2013 fiscal year, fueled in part by a strong fourth quarter.

Walgreens said Tuesday that it closed out the year ended Aug. 31 with sales of $72.2 billion, up 0.8% from $71.6 billion last year.

Net earnings for the year climbed to $2.5 billion, or $2.56 per diluted share, compared with $2.1 billion, or $2.42 per diluted share, in fiscal 2012.

Fiscal 2013 adjusted earnings came in at $3 billion, or $3.12 per diluted share, up from $2.6 billion, or $2.93 per diluted share, in fiscal 2012. The adjusted earnings per share result was in line with analysts' average estimate of $3.12, with projections ranging from a low of $3.07 to a high of $3.20, according to Thomson Financial.

Walgreens' full-year results were driven by a strong fourth quarter that saw the company rack up an 86.4% increase in net earnings and a 26.9% boost in adjusted earnings.

In the fourth quarter, net earnings totaled $657 million, or 69 cents per diluted share, surging from $353 million, or 39 cents per diluted share, a year earlier.

Adjusted fourth-quarter net income was $702 million, or 73 cents per diluted share, compared with $553 million, or 63 cents per diluted share, in the prior-year period. Analysts' consensus forecast for the quarter was for adjusted earnings per share of 72 cents, with estimates running from a low of 67 cents to a high of 77 cents, according to Thomson Financial.

On the revenue side, fourth-quarter sales rose 5.1% year over year to $17.9 billion from nearly $17.1 billion. Same-store sales were up 4.6% in the quarter, reflecting gains of 1.6% in the front end and 6.4% in the pharmacy. Customer traffic in comparable stores dipped 1.9%, while basket size grew 3.6%.

Prescription sales advanced 6.1% in the fourth quarter and accounted for 63.9% of revenue in the period. Walgreens filled 203 million prescriptions in the quarter, an 8.2% gain from a year earlier. Prescriptions filled in comparable stores increased 7.1% in the quarter.

Walgreens said it filled a record 821 million prescriptions in fiscal 2013, representing a retail prescription market share of 19.1%, up 0.4 percentage point over the previous year.

Executives said the strong performance in the quarter and for the full year has helped Walgreens generate operating cash flow of $4.3 billion and record free cash flow of $3.1 billion for fiscal year 2013. More than $1 billion of that was returned to shareholders through dividends.

In addition, they said, Walgreens' strategic partnership with Alliance Boots provided the company with combined first-year net synergies of $154 million, exceeding the previously stated range of $125 million to $150 million.

"Our solid results, especially in the latter part of the quarter, round out a year of steady progress on our long-term growth strategies to create a well experience, transform community pharmacy and establish an efficient global platform," president and chief executive officer Greg Wasson said in a statement, adding that he sees even better days ahead.

For example, in early September, AmerisourceBergen Corp. became Walgreens' primary supplier of branded drugs as part of the companies' long-term partnership.

"We are advancing our key strategies with a continued focus on disciplined execution and are addressing the challenges ahead in a difficult consumer environment and changing health care system," Wasson stated. "While we are pleased with our progress and momentum, we recognize there is more to do to achieve our vision of being the first choice for health and daily living for everyone in America and beyond."

Walgreens opened or acquired 33 new drug stores in the fourth quarter, compared with 54 a year ago. As of Aug. 31, the drug chain operated 8,116 drug stores overall, 186 more than a year ago, including 76 net new stores via acquisitions.