Walgreen’s Beats Forecast, Shares rise

Drugstore operator Walgreen Co. (NYSE: WAG) said prescription drug sales rose in the fiscal fourth quarter, pushing the company's results past Wall Street expectations and lifting shares to an annual high. Shares rose on trading today to close at $37.35, a $3.16 per share rise today, putting the stock price 9.24% higher.

Cost Cutting results in Profits

The Deerfield, Ill., company said its "Rewiring for Growth" expense savings plan started to pay off during the quarter, and also indicated the effects of the recession may be easing. Walgreen shares climbed to an annual high on the results.
For the quarter ended Aug. 31, Walgreen's profit fell 2 percent, to $436 million, or 44 cents per share, down from profit of $443 million, or 45 cents per share, a year prior. Revenue rose 8 percent to $15.7 billion from $14.6 billion.

These latest per-share results attribute 7 cents per share in savings from Rewiring for Growth, offset by 3 cents in costs. Analyst’s consensus forecast profit of 39 cents per share on revenue of $15.68 billion.

Walgreen’s said same-store sales, or sales at stores open for more than a year, rose 2.4 percent. Walgreen opened its 7,000th store in September and currently runs 7,042 drugstores, a few dozen more than main competitor CVS Caremark.

Same Store Sales Rise

Same-pharmacy sales rose 4.5 percent in stores open at least a year, while same-store sales of the "front end", or non-pharmacy items, fell 1.4 percent. The company filled 9 percent more prescriptions than it had a year ago. Even though consumers are actively looking for ways to save, Walgreen’s said fewer customers are skipping medications or stretching the terms of their prescriptions.

Walgreen’s also said that patients who receive 90-day orders of prescription drugs through the mail will now be able to pick up their orders at local Walgreen’s pharmacies, matching the features of the CVS program.

For the full reporting year, Walgreen’s earned $2 billion, or $2.02 per share, down from profit of $2.16 billion, or $2.17 per share, in 2008. Revenue rose to $63.34 billion from $59.03 billion. Walgreen’s expects store growth of 4.5 percent to 5 percent in fiscal 2010, which would give it more than 7,300 stores.

The company stated it is looking to save money by cutting back on store openings and carrying fewer products in inventory. They are going to boost sales by improving the layout of its stores in another new initiative.