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Walgreens tops Wall St. forecast as 4Q earnings rise
September 28th, 2010
DEERFIELD, Ill. – Citing a strong operating performance and cost measures, Walgreen Co. saw robust earnings and revenue gains for its fiscal 2010 fourth quarter.
The drug store chain reported Tuesday that for the fourth quarter ended Aug. 31, net earnings were $470 million, or 49 cents per diluted share, up from $436 million, or 44 cents per diluted share, a year earlier.
Walgreens' earnings in its fiscal 2010 fourth quarter exceeded the average analyst estimate of 44 cents per share, as well as the high forecast of 48 cents per share, according to Thomson Financial.
The company noted that the quarterly results include the impact of 4 cents per diluted share from costs related to the Duane Reade acquisition and 1 cent per diluted share in restructuring and other costs associated with its Rewiring for Growth initiative. In the year-ago quarter, net earnings reflected an impact of 3 cents per diluted share in restructuring and related costs.
With the positive earnings news, Walgreens shares surged $3.25 to $33.60, a gain of more than 10%, as of late morning trading on Tuesday.
"The double-digit increase in fourth-quarter earnings per share was driven by strong operating performance across our 7,500-store network and expense control companywide," Greg Wasson, Walgreens president and chief executive officer, said in a statement. "We were able to once again generate increased cash flow from operations for the quarter, and for the year we returned a record amount of cash to shareholders in the form of share repurchases and an increase in our dividend for the 35th consecutive year."
On the revenue side, fourth-quarter sales climbed 7.4% to $16.9 billion from $15.7 billion a year earlier. Comparable-store sales (excluding Duane Reade stores) edged up 1.5%, reflecting increases of 1.2% in the front end and 1.6% in the pharmacy.
Walgreens said the number of comparable prescriptions filled rose 3.3% versus last year's total, including 1.2 percentage points from more patients filling 90-day prescriptions. The drug chain added that excluding itself, the company exceeded by 3.0 percentage points the industrywide prescription growth rate during the same period, according to data from IMS Health.
Cash flow from operations for the fourth quarter totaled $925 million, and gross profit margins increased 70 basis points to 28.4% from 27.7% in the prior-year period. Front-end margins benefited from pricing, promotion and other improved efficiencies, as well as lower Rewiring for Growth expenses, Walgreens said, adding that pharmacy margins benefited from new generic introductions, partially offset by reimbursements.
For fiscal 2010, Walgreens' sales rose 6.4% to a record $67.4 billion from $63.3 billion in fiscal 2009. Full-year net earnings in fiscal 2010 were $2.1 billion, or $2.12 per diluted share, compared with $2.0 billion, or $2.02 per diluted share, a year ago. The pharmacy chain's full-year profit was in line with Thomson Financial's average analyst projection of $2.12 per share.
The company reported that fiscal 2010 earnings reflected impacts of 7 cents per diluted share in costs associated with Rewiring for Growth, 6 cents per diluted share in Duane Reade acquisition costs and 4 cents per diluted share from the elimination of the tax benefit for the Medicare Part D subsidy for retiree benefits (resulting from the Patient Protection and Affordable Care Act). In the previous fiscal year, net earnings included an impact of 16 cents per diluted share in restructuring and related costs.
In the fourth quarter, Walgreens opened or acquired 65 new drug stores, compared with 155 a year earlier. As of Aug. 31, the company operated 7,561 drug stores overall versus 6,997 a year ago.