Walgreen's fiscal second quarter earnings slipped from a year ago as the nation's largest drugstore chain reaped a smaller benefit from generic drugs and took a $60 million hit due to rough winter weather.
But the Deerfield, Ill., company's underlying performance impressed investors, and its shares rose, approaching the all-time high that they reached last month.
Walgreen executives said Tuesday that a wave of new generic drug introductions peaked in last year's quarter, which helped the company's bottom line then but made comparisons difficult for this year's quarter.
Generic drugs, which are cheaper alternatives to branded medicines, squeeze drugstore sales but improve profitability because they come with a wider margin between the cost for the pharmacy to purchase the drugs and the reimbursement it receives.
The company said Tuesday that the tough comparison between this year's quarters and last year will ease later this year. Walgreen expects generics to start helping its year-over-year performance again by the end of the fiscal year.
Walgreen said a tough winter also affected its performance in the quarter by keeping customers away from its stores, forcing it to temporarily close some locations and adding about $23 million in snow removal costs.
Overall, Walgreen Co. earned $754 million, or 78 cents per share, in the quarter that ended Feb. 28. That's down from $756 million, or 79 cents per share, a year ago.