Walgreens Beats Profit Estimates – Shares Rally

Via Proactiveinvestors :

Despite an inventory write-down and restructuring costs, Walgreen’s (NYSE:WAG) first quarter beat analyst estimates as gross margins increased. 

First quarter profit for the drug store chain increased nearly 19% year-over-year to $580 million, or 62 cents per diluted share. Restructuring costs related to the company’s affected its bottom line by about 3 cents per diluted share. 

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For the quarter ended November 30, total sales increased 6% year-over-year to $17.3 billion while same store sales edged up by 0.8%.  Prescription sales, which makes up about 66% of sales for the quarter, climbed 5.3% overall and 0.9% at stores opened for at least a year.  

The results trumped analyst estimates of a profit of 54 cents on revenues of $17.30 billion. 

“Our performance was driven by our continued focus on gross profit margins, cost control and the strategic slowing of our new store openings. As a result of improved merchandising, including promotions and pricing, we saw significant increases in gross profit margins in the front end, “said Greg Wasson, CEO of Walgreens.

Gross margins increased 80 basis points compared to the year-ago period to 28.5%.

During the quarter, Walgreens provided about 5.6 million flu shots, making it the largest flu shot provider in the U.S. beside the federal government.  But the number was less than expected, prompting the firm to take a 2 cents per diluted share inventory write-down.

During the quarter, the company opened or acquired about 121 new drugstores. 

Looking ahead, the company cautioned that “persistent high unemployment makes this a challenging retail environment during the holiday season”.  Christmas sales and the flu season are often key drivers for the company’s second quarter results.

As of 12:58 pm EST, the company’s shares have rallied 7% to trade at $39.49.

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