NEW YORK (TheStreet) -- Walgreen (WAG) rose 4.35% to $67.11 at 10:35 a.m. on Tuesday despite its second-quarter earnings report that came up short of analysts' expectations. A slowdown in generic drug introduction and a mild flu season hampered the largest U.S. drugstore chain's performance.
Walgreen reported a year-over-year decline in net income to $754 million, or 78 cents a share, from $756 million, or 79 cents a share. Profit excluding items was 91 cents, two cents less than the consensus estimate of analysts polled by Thomson Reuters. Walgreen said price cuts it made to compete with rivals during the difficult holiday season also put pressure on its second-quarter profit.
Gross profit margin declined 1.3% year over year to 28.8%. Sales rose 5.1% to $19.61 billion, while comparable-store sales in stores open at least a year rose 4.3% thanks mostly to prescription sales gains, which generate almost two-thirds of the company's revenue. Comparable-store sales of general merchandise ticked upward just 2% thanks to fewer shoppers entering Walgreen's drugstores.
CEO Greg Wasson said the pressure from fewer new generic drugs would lighten in the second half of the fiscal year. The company also said its partnership with Alliance Boots Holdings, which runs the largest European pharmacy chain, could generate synergies between $375 million and $425 million, up $25 million from its previous estimate. Walgreen wants to combine the companies' drug purchases and sell the European products in its stores.
Walgreen bought 45% of Alliance Boots in 2012 with an option to buy the remainder in 2015.