Walgreen Co. said Tuesday the elimination of a Medicare-related tax benefit, costs associated with its acquisition of Duane Reade and restructuring charges drove net earnings down 11.3 percent, and below analysts’ expectations, in the third quarter ended May 31.
The Deerfield, Ill.-based drugstore chain posted net income of $463 million, or 47 cents a diluted share, during the period, versus profits of $522 million, or 53 cents a share, in the same period a year ago.
On average, analysts polled by Yahoo Finance expected earnings per share of 57 cents. The retailer’s quarterly sales were up 6.1 percent to $17.2 billion, from $16.21 billion a year ago.
“We anticipated this would be a challenging quarter for several reasons, including the sluggish economy, prescription reimbursement pressure compounded by a slowdown in the rate of introduction of new generics and a lower incidence of flu compared with the beginning of the H1N1 pandemic a year ago,” stated president and chief executive officer Greg Wasson. “While we saw a number of positive signs in the quarter, and reached several important milestones, we also realize there is more to be done.”
Prescription sales were up 5.7 percent and accounted for 65.4 percent of quarterly sales. Same-store sales increased 0.7 percent in the quarter, while comparable store front-end sales increased 0.1 percent, the firm stated, adding that front-end sales were impacted by continued weak demand for discretionary goods and by lower demand for flu-related products compared with the year-ago quarter.
At the end of the third quarter, Walgreens operated 8,019 locations in all 50 states, Puerto Rico and Guam. The company said it has 7,522 drugstores nationally.
For the nine months, Walgreens’ earnings came in at $1.62 billion, or $1.64 a share, up from $1.57 billion, or $1.58 per share, during the comparable 2009 period. Revenues were up 6.1 percent to $50.55 billion from $47.63 billion.
Shares of Walgreens closed Tuesday at $28.17, down $1.97 or 6.5 percent.
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