(Adds analyst comment, details from conference call, share
By Phil Wahba
March 25 Walgreen Co reported
lower-than-expected quarterly profit on Tuesday but said it
expected a bigger boost this year from its partnership with
European retailer Alliance Boots Holdings Ltd than it
Walgreen, the operator of the largest U.S. drugstore chain,
also said it was closing 76 stores in the next six months, most
of them near another Walgreens store. That will add $40 million
to $50 million a year in profit beginning next fiscal year.
Shares rose 4.2 percent to $67 in morning trading.
Walgreen bought 45 percent of Alliance Boots, which runs
Europe's largest pharmacy chain, in 2012, with an option to buy
the rest in 2015.
The U.S. company said combining the chains' drug purchases
and selling the European company's products in its stores would
lead to so-called synergies of between $375 and $425 million in
this second year of their partnership, $25 million more than its
Walgreen is also winning new customers with special
discounts and its year-and-a-half old Balance Rewards loyalty
program, which now has 80 million active members.
"We look for Walgreen's base business to improve,
particularly as the company's customer loyalty program continues
to gain traction," Edward Jones analyst Judson Clark wrote in a
For the quarter ended Feb. 28, Walgreen reported a
lower-than-expected quarterly profit as a slowdown in the
introduction of higher-profit generic medicines and a milder flu
season cut into its gross profit margin.
The operator of the largest U.S. drugstore chain said its
profit also come under pressure from price cuts implemented to
compete with rivals during a tough holiday season for retailers.
Net income slipped to $754 million, or 78 cents per share,
in the quarter, from $756 million, or 79 cents per share, a year
earlier. Excluding one-time costs, Walgreen had a profit of 91
cents a share, two cents below Wall Street estimates, according
to Thomson Reuters I/B/E/S.
The company's gross profit margin fell 1.3 percentage points
to 28.8 percent of sales.
Chief Executive Greg Wasson said pressure from fewer new
generic drugs would ease in the second half of its fiscal year.
Sales rose 5.1 percent to $19.61 billion. Walgreen's sales
at stores open at least a year rose 4.3 percent in the quarter,
led by gains in prescription sales, which generate almost
two-thirds of company revenue.
Comparable sales of general merchandise rose a more modest 2
percent, hurt by fewer shoppers coming into Walgreen's
(Reporting by Phil Wahba in New York; Editing by Lisa Von Ahn
and Nick Zieminski)