Nat Worden
A slew of new store openings in its third quarter, coupled with strength in sales of prescription drugs, drove a better-than-expected 14% gain in profits at Walgreen (WAG Quote - Cramer on WAG - Stock Picks).
The pharmacy chain said it earned $469.2 million, or 46 cents a share, for the quarter, up from the $411 million, or 40 cents a share, a year ago. Analysts on Wall Street were expecting earnings of 44 cents a share, according to consensus estimates reported by Thomson First Call. Shares of Walgreen were recently up 26 cents, or 0.6%, to $43.87. "We turned the corner in May on the impact of a mild flu season and are seeing more patients filling prescriptions under the Medicare drug benefit program," said Walgreen. "Many patients who couldn't afford to be compliant with their drug therapy before are now refilling their prescriptions more regularly. That helped pharmacy sales to trend up late in the quarter." The company's sales rose 12% to $12.18 billion in the quarter, thanks in part to new store openings. It opened 112 new stores, compared with 87 in the year-ago period. In the first nine months of its fiscal year, it opened or acquired 334 stores, putting it on track to reach its goal of opening 475 stores in fiscal 2006, including about 390 net new stores after relocations and closings. Meanwhile, those figures don't include Walgreen's recently announced acquisition of 76 Happy Harry's pharmacies that will merge with the company when that transaction closes in the coming weeks. "We'll continue to evaluate other potential retail pharmacy acquisitions, but we'll pursue only those with a solid strategic fit, which are rare," said Walgreen. With 5,251 drugstores in 45 states and Puerto Rico, most of Walgreen's growth still comes from organic expansion through new store openings, as opposed to the major acquisitions favored by its chief competitor, CVS (CVS Quote - Cramer on CVS - Stock Picks). In fiscal 2007, it expects organic growth of more than 400 net new stores after closings and relocations, with an overall expansion of 500 new stores.
RSS
