(By Mayur Pahilajani - iStockAnalyst Writer)
Deerfield, Ill. - Walgreen Co. (NYSE: WAG) posted first-quarter net income of nearly 11 percent and said it will cut costs on stores opening in the new locations. Shares of the company tumbled after the company reported its quarterly sales and net profit, which trailed the market analysts' estimate.
The second-largest U.S. drugstore company by number of stores said its net income was at $408 million, or 41 cents a share, for the quarter ended Nov. 30, compared with $456 million, or 46 cents a share, a year earlier in the same period.
“We believe that further slowing of organic store growth is a prudent step in the context of current economic conditions," Chief Operating Officer Gregory D. Wasson said in a statement on Monday.
Gross margin of the company slipped by 0.2 percentage points to 27.8 percent from 28 percent repored in the year-ago quarter, resulting from the overall weakness in its non-retail operations and an inventory charge during the quarter.
Total sales of the U.S. drugstore increased by 6.6 percent to $14.95 billion and sales at stores open at least a year (or same-store sales) increased by 1.7 percent.
Prescription sales, which accounted for 66 percent of sales in the quarter, moved up by 6.2 percent, while prescription sales in same-stores climbed by 2.6 percent in the quarter.
The market analysts on Wall Street were expecting the Deerfield, Ill.-based company to post earnings of 46 cents a share with a revenue of $15.08 billion in the fiscal first-quarter.
“Customer traffic strengthened through the quarter and we’re making substantial progress on our growth strategies to get more from our core operations and enhance the customer experience,” Wasson said.
The company’s number of U.S. retail prescriptions filled increased 3.7 percent over last year’s first quarter, compared to an industry-wide decline of 0.5 percent (excluding Walgreens) during the same period, the firm noted. Retail pharmacy margins advanced led by higher sales of generic drugs.
Walgreen also announced plans to further reduce its organic store openings to a rate between 4.0 percent and 4.5 percent in 2010 and between 2.5 and 3.0 percent in 2011. This is a further reduction from plans announced last July to slow organic store openings to 5 percent by 2011.
The revised target growth rate is expected to lower capital expenditures through 2011 by around $500 million, which is in addition to the $500 million capital spending savings announced in July.
Selling, general and administrative expenses increased 9.1 percent in the quarter, compared to the same quarter last year, as the drugstore opened or acquired 212 drugstores in the quarter.
Shares of the company were moving down by $1.57 or 6.02 percent to $24.51 at 11:31 a.m. ET on Monday in composite trading on the New York Stock Exchange, after it hit a low of $24.40 earlier in the session. The stock of the company has traded as low as $21.28 and as high as $39.25 in the last 52 weeks.
Source: http://news.walgreens.com/article_display.cfm?article_id=5126
