Citing strong operating performance and tight control on expenses, Walgreen (NYSE: WAG) reported higher revenue and earnings for the fourth fiscal quarter and its full fiscal year 2010.
The retailer, which operates 8,000 stores, said profit rose to $470 million, or a diluted 49 cents a share, in the quarter that ended Aug. 31. A year earlier it earned $436 million, or 44 cents a share for the quarter.
Sales rose to a record $16.9 billion in the quarter and $67.4 billion for the fiscal year 2010, both slightly better than expectations of $16.8 billion for the quarter and $67.38 billion for the year.
Diluted EPS included costs associated with the company’s acquisition of the Duane Reade stores and other restructuring costs. Excluding items, Walgreens EPS totaled 54 cents a share, beating analysts’ estimates of 44 cents a share.
In July, competitor CVS Caremark (NYSE: CVS) reported second-quarter earnings of 60 cents a share, sharply below estimates of 68 cents a share. CVS also cut its full-year earnings guidance. Meanwhile, Rite Aid (NYSE: RAD) also reported a poor second quarter and forecast a larger loss for its 2010 fiscal year.
Walgreen sales grew 7.4% year-over-year in the quarter and 6.4% compared with the 2009 fiscal year. Comparable store sales were up 1.5%, not including the recently acquired Duane Reade stores. Prescription sales, which account for nearly 66% of the company’s revenue, rose 6.5% in the quarter.
The company earned $2.12 a share in 2010, meeting analysts’ expectations, and that was up 10 cents a share from 2009 earnings.
Walgreens added a net 564 stores in fiscal 2010, including 258 in the Duane Reade acquisition, boosting its total to 8,000 stores. It expects to add up to 3% more stores in 2011. Walgreens revealed little else about its 2011 outlook in its earnings release.
Two popular medications will lose patent protection in the coming year: Lipitor and Plavix. When the generic equivalents hit the stores, profit margins could jump from around 9% on the branded drugs to more than 40% on the generics. This could be a huge boon to Walgreens and other drug stores.
It would have been nice for Walgreens to post some pro forma numbers to account for the Duane Reade acquisition. From the numbers the company did report, it appears that the acquisition saved Walgreens’ bacon, both in terms of revenue and earnings.
As of this writing, Paul Ausick did not own a position in any of the stocks named here.
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