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Duane Reade Lowers Third-Quarter Outlook

Duane Reade (DRD) lowered its third-quarter earnings estimate, saying a drop in drug sales and the weakened economy were hurting its bottom line.

The New York company now expects to earn 8 cents to 9 cents a share, below its original expectation of 15 cents to 20 cents a share. Expected results have been adjusted for the impact of the Aug. 14 power outage.

Analysts foresee earnings of 18 cents a share, on average. The company earned 33 cents a share in the year-ago quarter.

"We continue to experience a sluggish economy and the related impact of persistent unemployment in the metro New York area," said CEO Anthony J. Cuti. "We believe that a significant portion of our challenges are attributable to our region's weak economy and are hopeful that the market will experience improved economic indicators as we enter the new fiscal year."

Sales in the quarter ended Sept. 30 were $338.6 million, which is $11.4 million below the company's prediction issued at the release of its second-quarter financial results. The company said the blackout cut sales by $3.3 million.

Same-store sales rose 3%, pharmacy same-store sales increased 8.6%, but front-end same-store sales fell 1.1%. Duane Reade said the power outage cut its same-store sales increase by about 1%.

The slowing growth rate of the prescription sector hurt business as well. Major contributors were the shift of Claritin and Prilosec from pharmacy to over-the-counter medications, an increased proportion of generic prescriptions filled, declines in hormone replacement prescriptions, and persistent unemployment, which has increased the number of uninsured in the population, Duane Reade said.

Looking to full-year 2003, the company sees earnings of 55 cents to 61 cents a share. Analysts expect 79 cents a share, however. The company earned $1.11 a share in 2002.

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