Walgreen's second quarter profit climbs 10%, but shares fall
Pharmacy chain Walgreen (NYSE:WAG) (NASDAQ:WAG) reported Tuesday that second quarter profits were in line with estimates, but analysts were disappointed nonetheless as gross margin failed to improve.
The Illinois-based company's shares fell 6.7% to trade at $39.16 as of 2:52 pm EST. An analyst at Edward Jones was cited in the Wall Street Journal as saying that investors were unhappy about the unchanged gross margin, as well as the company's restrained outlook on cost-savings.
For the quarter ending February 28, the company had net earnings of $739 million, or 80 cents a share. That was up from $669 million, or 68 cents per share, for the year-ago period.
Revenues rose by 8.8% to $18.5 billion, exceeding analyst estimates of $18.4 billion. Gross margin held steady at 28.8%.
Comparable store sales, or those of stores opened at least a year, increased 4.1%. Comparable front-end drugstore sales rose 4.3%, helped by a later onset of the cold and flu season as both customer traffic and basket size increased.
Prescription sales, which accounted for 62.6% of total sales in the quarter, climbed 7.7%.
Earlier this month, Walgreen sold its pharmacy benefit management division to Catalyst Health Solutions (NASDAQ:CHSI) for $525 million. The company also repurchased about $300 million worth of shares during the quarter.
Looking ahead, the company said it is on track to save $1 billion from its cost-cutting program in 2011 - the low end of analyst estimates.
Walgreen has 7,690 drugstores nationally, including 127 medical facility pharmacies. The chain also operates worksite health centers, home care facilities and mail service pharmacies.
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