Walgreen Q4 Adj. Profit Tops View, But Revenues Miss

(RTTNews) - Drugstore chain operator Walgreen Co. (WAG) reported Tuesday a profit for the fourth quarter that surged 86 percent from last year, reflecting improved margins and revenue growth amid higher generic prescription drugs dispensed and positive contribution from the front end. Adjusted earnings per share topped analysts' expectations by a penny, while quarterly revenues missed their estimates.

"We had a solid quarter across our entire business. We saw improvement in our daily living business resulting from the investments we made and enhanced execution," President and CEO Greg Wasson said.

The Deerfield, Illinois-based company reported net earnings of $657 million or $0.69 per share for the fourth quarter, sharply higher than $353 million or $0.39 per share in the prior-year quarter. Excluding items, net earnings for the latest quarter was $702 million or $0.73 per share, compared to $553 million or $0.63 per share in the year-ago quarter.

The company noted that reported and adjusted net earnings for the latest quarter include $0.03 per share in net gains from certain litigation matters.

On average, 20 analysts polled by Thomson Reuters expected the company to report earnings of $0.72 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter rose 5.1 percent to $17.94 billion from $17.07 billion in the same quarter last year, but missed sixteen Wall Street analysts' consensus of $17.95 billion by a whisker.

Total sales in comparable stores sales or sales at stores open for at least 12 months, grew 4.6 percent in the quarter, with front-end comparable store sales increasing 1.6 percent. However, traffic in comparable stores slid 1.9 percent, while basket size was up 3.6 percent.

According to the company, prescription sales for the fourth quarter, which accounted for 63.9 percent of total sales, increased 6.1 percent, and prescription sales in comparable stores grew 6.4 percent. Walgreen's number of prescriptions filled increased 8.2 percent year-on-year to 203 million, helped by 7.1 percent growth in prescriptions filled in comparable stores.

Operating margins expanded 230 basis points to 5.7 percent aided by a 60 basis points improvement in gross margins and a 100 basis points decline in selling, general and administrative expenses as a percentage of total sales.

The company noted that its partnership with Alliance Boots GmbH announced in mid-March contributed equity earnings of $0.08 per share to its fourth-quarter adjusted results.

Walgreen said its joint synergy program with its strategic partner, Alliance Boots, has delivered combined first-year net synergies of $154 million, exceeding the previously stated range of $125 million to $150 million.

For fiscal 2013, the company reported net earnings of $2.45 billion or $2.56 per share, higher than $2.13 billion or $2.42 per share in the prior year. Excluding items, adjusted net earnings was $2.98 billion or $3.12 per share, compared to $2.57 billion or $2.93 per share in the year-ago quarter. Analysts expected the company to report earnings of $3.12 per share for fiscal 2013.

Net sales for the full year edged up 0.8 percent to a record $72.22 billion from $71.63 billion in the previous year. Street was looking for full-year 2013 revenues of $72.23 billion.

"Looking ahead, we begin the new fiscal year well positioned to build on the momentum we have coming out of a solid fourth quarter. We are advancing our key strategies with a continued focus on disciplined execution, and are addressing the challenges ahead in a difficult consumer environment and changing health care system," Wasson added.

WAG closed Monday's regular trading session at $53.80, down $0.47 on a volume of 9.63 million shares. In the past 52-week period, the stock has been trading in a range of $31.88 to $56.84.