WALGREEN CO. REPORTS THIRD QUARTER 2009 EARNINGS PER SHARE OF
53 CENTS; RESULTS INCLUDE 6 CENTS PER SHARE OF RESTRUCTURING COSTS
| · | Third quarter sales up 8.0 percent to record $16.2 billion |
| · | Cash flow from operations for the quarter increases 54 percent over last year’s quarter to $1.5 billion |
DEERFIELD, Ill., June 22, 2009 – Walgreens (NYSE, NASDAQ: WAG) today announced earnings and sales results for the third quarter of fiscal year 2009.
Net earnings for the quarter ending May 31 were $522 million or 53 cents per share (diluted), including an impact of 6 cents in costs and 6 cents in savings associated with the company’s Rewiring for Growth and Customer Centric Retailing (CCR) initiatives. This reflects an 8.8 percent decrease from $572 million or 58 cents per share (diluted) in the same quarter a year ago.
Net earnings for the first nine months of fiscal 2009 were $1.57 billion or $1.58 per share (diluted), including an impact of 13 cents in costs and 9 cents in savings associated with the Rewiring for Growth and CCR initiatives. This reflects an 8.4 percent decrease from last year’s $1.71 billion or $1.72 per share (diluted).
Cash flow from operations for the quarter increased 54 percent over last year’s quarter to $1.5 billion, driven in large part by improved inventory management. “We’re generating strong cash flow despite the ongoing challenging economic climate,” said Walgreens President and CEO Gregory D. Wasson. “Our cash performance is a direct result of our strategies creating a virtuous circle that allows us to invest back into those strategies and deliver value to shareholders.”
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Third quarter sales increased 8.0 percent from the prior-year quarter to a record $16.2 billion, and grew 7.2 percent to $47.6 billion for the first nine months. Total sales in comparable stores (those open at least a year) increased 2.8 percent in the quarter, while comparable store front-end sales increased 0.9 percent.
Prescription sales, which accounted for 65.6 percent of sales in the quarter, climbed 8.2 percent, while prescription sales in comparable stores increased 3.8 percent. Walgreens filled 8.3 percent more prescriptions in this year’s third quarter versus the year-ago quarter. That includes a benefit of 1.4 percentage points due to more patients filling 90-day prescriptions, which are counted as three 30-day prescriptions. The company exceeded by 5.7 percentage points the industry-wide growth rate, excluding Walgreens, as reported by IMS.
Selling, general and administrative expense dollars in the third quarter increased 8.4 percent over the year-ago period, including 1.0 percentage point for Rewiring for Growth costs. The company opened 162 new drugstores in the quarter compared with 45 in this year’s second quarter and 122 in the year-ago quarter. Total expenses were partially offset by tight controls on store salaries and expenses.
Gross profit margins decreased 0.8 percentage points from the prior-year quarter to 27.5 as a percent of sales. Negatively impacting margins were front-end product mix including LIFO, non-retail businesses and CCR markdowns. Helping overall margins were an increase in pharmacy margins as a result of the impact of generic drug sales.
During the quarter Walgreens rolled out its new CCR format to 35 pilot stores, which are performing ahead of plan. In addition, optimized assortment resets were completed for nearly 40 product categories nationwide.
The Rewiring for Growth initiative is on pace to reach $1 billion in annual cost reductions and productivity gains beginning in 2011.
“We’re executing on our key initiatives,” said Wasson, “and we’re encouraged by early results on several recently launched programs, including our CCR and Rewire initiatives.”
Among other quarter highlights, the company acquired 40 drugstores, including 29 Drug Fair stores in central and western New Jersey and eight Rite Aid locations in San Francisco and eastern Idaho. It also acquired the home infusion and respiratory therapy operations of Pennsylvania-based Air Products Healthcare.
“Our priority remains driving long-term growth through prudent investments in our core and emerging businesses,” said Wasson. “We are well positioned to emerge from the current recession even stronger than we entered it.”
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At May 31, Walgreens operated 7,361 locations in 49 states, the District of Columbia, Puerto Rico and Guam. That includes 6,857 drugstores, as well as worksite health and wellness centers, home care facilities and specialty, institutional and mail service pharmacies. Its Take Care Health Systems subsidiary manages 716 in-store convenient care clinics and worksite health and wellness centers.
Walgreens will hold a one-hour conference call to discuss the quarter’s results beginning at 8:30 a.m. Eastern time today, June 22. The conference call will be webcast through Walgreens investor relations Web site at: http://investor.walgreens.com. This webcast will be archived on the site for 12 months after the call.
A replay of the conference call also will be available from 11:30 a.m. Eastern time, June 22, through June 29. The replay can be accessed at http://investor.walgreens.com or by calling 888-203-1112 within the U.S. and Canada, or 719-457-0820 outside the U.S. and Canada, using replay code 6229674.
This news release may contain forward-looking statements that involve risks and uncertainties. The following factors could cause results to differ materially from management expectations as projected in such forward-looking statements: seasonal variations, competition, risks of new business areas, the availability and cost of real estate and construction, and changes in federal or state legislation or regulations. Investors are referred to the “Cautionary Note Regarding Forward-Looking Statements” in the Company’s most recent Form 10-K, which Note is incorporated into this news release by reference.
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