Share “Walgreen fiscal 1Q profit sinks nearly 26 pct”

Walgreen fiscal 1Q profit sinks nearly 26 pct

Published on NewsOK Modified: December 21, 2012 at 5:23 pm •  Published: December 21, 2012
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Walgreen's fiscal first-quarter earnings sank nearly 26 percent as costs tied to a couple big deals and Superstorm Sandy helped put a bigger-than-expected dent in the drugstore chain's performance.

CEO Greg Wasson told analysts he saw the quarter as a "turning point" for the Deerfield, Ill., company, which has been working to recapture customers it lost during a contract dispute with Express Scripts Holding Co. But investors didn't buy that message at least initially, as the stock fell deeper than broader market declines in Friday trading.

Walgreen Co. spent $4 billion in cash earlier this year to buy a stake in Alliance Boots, a Swiss company that runs the largest drugstore chain in the United Kingdom. It also spent $438 million on a drugstore chain focused on the mid-South under the USA Drug, Super D Drug and Med-X names.

Costs tied to those deals totaled $23 million in the quarter, and Walgreen said it only counted a small portion of the gains it received from Alliance Boots. It is reporting those gains a quarter after they occur to address audit and regulatory requirements.

The storm system that swept up the East Coast in late October also cost $24 million in the quarter, as it forced Walgreen to temporarily close hundreds of stores.

Overall, Walgreen earned $413 million, or 43 cents per share, in the three months that ended Nov. 30. That compares with net income of $554 million, or 63 cents per share, a year ago. Walgreen said earlier this month revenue fell nearly 5 percent to $17.34 billion.

Excluding one-time costs, adjusted earnings were 58 cents per share.

Analysts forecast, on average, earnings of 70 cents per share, according to FactSet.

Shares dropped 3.3 percent, or $1.24, to close at $36.31 Friday, while the Standard & Poor's 500 index fell 1 percent.

Walgreen runs more than 8,000 drugstores in all 50 states as the nation's largest drugstore chain. The company's revenue has slumped through 2012 after it started the year stuck in a contract squabble with Express Scripts, for which it fills prescriptions.

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