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  • wall_st_knight_mare wall_st_knight_mare Sep 28, 2012 9:51 AM Flag

    Walgreen quarterly profit down, hurt by Express Scripts

    Thu, Sep 20 2012
    Walgreen loses key Express customer; August sales drop
    Thu, Sep 6 2012Fri Sep 28, 2012 8:35am EDT

    (Reuters) - Walgreen Co (WAG.N) posted a lower quarterly profit on Friday as customers went elsewhere while the largest U.S. drugstore chain did not fill prescriptions for those on Express Scripts Holding Co (ESRX.O) pharmacy benefit plans.

    Walgreen, whose shares fell more than 3 percent, said the year was challenging, due largely to its now-resolved contract dispute with Express Scripts as well as stressed consumers' cutting back on everyday purchases.

    Not being part of the Express Scripts pharmacy provider network cost Walgreen 6 cents per share in the fourth quarter ended on August 31 and 21 cents for the full fiscal year, which the retailer said matched its expectations.

    Walgreen's fourth-quarter earnings fell to $353 million, or 39 cents per share, from $792 million, or 87 cents per share, a year earlier.

    Excluding acquisition- and inventory-related charges, profit fell to 63 cents per share from 66 cents.

    Walgreen and Express Scripts did not agree on a new contract in 2011. As a result, Walgreen could not fill Express prescriptions from January 1, 2012, until the companies resolved their issues and a new contract kicked in on September 15.

    For the first eight and a half months of the year, patients on Express Scripts plans had to find other places to get their medicine. Walgreen lost customers and revenue to other chains such as CVS Caremark Corp (CVS.N) and Rite Aid Corp (RAD.N).

    Walgreen, which runs 7,930 U.S. drugstores and hundreds of health clinics, said fourth-quarter sales had fallen 5 percent to $17.07 billion.

    At stores open at least a year, sales fell 8.7 percent, with traffic in comparable stores down 3.2 percent. Same-store prescription sales plunged 12.8 percent, and general merchandise sales declined 1.3 percent.

    Now that Walgreen has patched things up with Express Scripts, the pharmacy is trying to woo those patients back and has also just launched a loyalty card.

    Walgreen is also in its early days as a 45 percent owner of Europe's Alliance Boots, a deal that trimmed profit during the quarter.

    The U.S. company completed its initial investment in Alliance Boots in August, its first international push. Walgreen has the option to buy the rest of the European drugstore chain in about three years.

    Shares of Walgreen were down 3.3 percent at $35.41 in trading before the market opened.

    Sentiment: Hold