Walgreens Profit Down Slightly, To Close 76 Stores

(RTTNews) - Drugstore chain Walgreen Co. (WAG) reported Tuesday a profit for the second quarter that edged down from last year, but sales improved on purchases at both ends of the store.

Adjusted earnings per share missed analysts' expectations by two cents, while quarterly revenues matched their estimates.

Additionally, the company said it plans to close 76 drugstores during the second half of fiscal 2014. Including these store closures, Walgreens still expects a net increase in its store count in fiscal 2014 of about 55 to 75 locations.

"Our second quarter performance, in spite of expected headwinds from slower generic drug introductions, comparisons with last year's flu season and severe weather, was marked by solid top-line growth driven by record quarterly sales and record second-quarter prescriptions filled. We also continued to gain prescription market share while we maintained a firm hold on our costs," President and CEO Greg Wasson said in a statement.

The Deerfield, Illinois-based company reported net earnings of $754 million or $0.78 per share for the second quarter, edging down from $756 million or $0.79 per share in the prior-year quarter.

The company noted that results for the latest include a net positive impact of $0.13 per share, while the year-ago quarter included a net positive impact of $0.17 per share.

Excluding items, net earnings for the latest quarter was $880 million or $0.91 per share, compared to $915 million or $0.96 per share in the year-ago quarter.

On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $0.93 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter rose 5.1 percent to a record of $19.61 billion from $18.65 billion in the same quarter last year, and matched eighteen Wall Street analysts' consensus estimate of $19.61 billion.

Total sales in comparable stores sales or sales at stores open for at least 12 months, grew 4.3 percent in the quarter, with front-end comparable store sales increasing 2.0 percent. However, traffic in comparable stores slid 1.4 percent, while basket size was up 3.4 percent.

According to the company, prescription sales for the second quarter, which accounted for 62.2 percent of total sales, increased 7.0 percent, and prescription sales in comparable stores grew 5.8 percent. Walgreens' number of prescriptions filled increased 2.8 percent year-on-year to 214 million, helped by 2.2 percent growth in prescriptions filled in comparable stores.

Walgreens noted that its partnership with Alliance Boots GmbH announced in mid-March 2013 contributed equity earnings of $0.08 per share to its second-quarter adjusted results. The joint synergy program has delivered combined synergies with Alliance Boots of about $236 million in first half of fiscal 2014.

The company said it now estimates accretion from Alliance Boots in the third quarter to be an adjusted $0.13 to $0.14 per share. The joint synergy program is now estimated to deliver second-year combined synergies of $375 million to $425 million.

The company added that the store optimization is expected to result in an estimated $0.02 to $0.03 in adjusted earnings per share benefit in fiscal 2015. It also is expected to result in charges of $240 million to $280 million, most of which is expected to be recognized in the third and fourth quarters of fiscal 2014.

WAG closed Monday's regular trading session at $64.31, down $0.83 on a volume of 8.47 million shares. In the past 52-week period, the stock has been trading in a range of $43.31 to $69.84.