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Walgreen Co. Reports Fiscal 2013 Third Quarter Results



Third quarter sales increased 3.2 percent compared with the prior-year quarter to $18.3 billion, while sales for the first nine months decreased 0.5 percent to $54.3 billion. Front-end comparable store sales (those open at least a year) increased 0.4 percent in the third quarter, customer traffic in comparable stores decreased 3.9 percent and basket size increased 4.4 percent, while total sales in comparable stores increased 1.4 percent.

Prescription sales, which accounted for 63.1 percent of sales in the quarter, increased 3.4 percent, while prescription sales in comparable stores increased 2.0 percent. The company filled 209 million prescriptions in the quarter, an increase of 8.7 percent over last year’s third quarter. Prescriptions filled in comparable stores increased 7.1 percent in the quarter.

Gross Profit and SG&A

Total gross profit dollars increased $208 million, or 4.1 percent, compared with the year-ago third quarter, with gross profit margins increasing 30 basis points versus the year-ago quarter to 28.5 as a percentage of sales. The growth in margins was driven primarily by an increase in generic prescription drugs dispensed and positive contribution from the front end. The LIFO provision was $120 million in the third quarter, compared with $60 million in the year-ago quarter, primarily driven by prescription drug inflation.

Selling, general and administrative expense dollars increased $221 million, or 5.3 percent, compared with the year-ago quarter, including 0.2 percentage point of SG&A expenses for acquisition-related costs and 0.6 percentage point for a legal settlement with the DEA.

The company opened or acquired 39 new drugstores in the third quarter compared with 52 in the year-ago quarter.

Interest expense increased to $50 million in this year’s third quarter compared with $17 million in the year-ago quarter. The increase in interest expense was primarily attributable to the $4.0 billion note issuance associated with the Alliance Boots transaction and also includes a $7 million negative impact from a non-cash fair market value adjustment to the company’s outstanding interest rate swaps.

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