Walgreen Earnings Follow Better Same-Store Sales

Paul Ausick

Walgreen Co. (WAG) posted fourth-quarter and fiscal-year 2013 results before markets opened Tuesday morning. The drugstore chain reported adjusted diluted earnings per share (EPS) of $0.73 on revenues of $17.94 billion. In the same period a year ago, Walgreen reported EPS of $0.63 on revenue of $17.07 billion. Fourth-quarter results also compare to the consensus estimates for EPS of $0.72 and $17.95 billion in revenue.

For the full year, Walgreen’s sales totaled $72.22 billion, compared with $71.63 billion in fiscal 2012. EPS totaled $3.12, compared with a year-ago total of $2.93. The consensus estimates called for EPS of $3.12 on revenues of $72.23 billion.

Walgreen did not offer guidance in its earnings release, but the company’s CEO did have this to say about the future:

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Looking ahead, we begin the new fiscal year well positioned to build on the momentum we have coming out of a solid fourth quarter. We are advancing our key strategies with a continued focus on disciplined execution, and are addressing the challenges ahead in a difficult consumer environment and changing health care system.

The consensus first-quarter 2014 forecast calls for EPS of $0.76 on revenues of $18.28 billion. For the full 2014 fiscal year, the consensus estimates call for EPS of $3.54 on revenues of $75.66 billion.

In June of last year, Walgreen paid $6.7 billion for a 45% stake in Alliance Boots, the world’s largest pharmacy-led health and beauty group. At the time, Walgreen said it expected combined synergies to reach $100 million to $150 million in the first year of the partnership. The actual outcome was $154 million, and Alliance Boots contributed $0.08 per share to fourth quarter EPS.

Walgreen also said last June that it expected the partnership to add $0.23 to $0.27, excluding transaction costs, to first-year EPS. It is a bit difficult to tease out the actual amount from the reconciliation of non-GAAP financial measures, but the actual result appears to be worse than that.

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Prescription sales rose 6.1% year-over-year in the fourth quarter, and same-store prescription sales rose 6.4%. Prescription sales accounted for 63.9% of total sales in the quarter. Gross margins rose 60 basis points, to 28.9%, as a result of an increase in sales of generic prescription drugs.

Shares are down fractionally in premarket trading this morning, at $53.34 in a 52-week range of $31.88 to $56.84. Thomson Reuters had a consensus analyst price target of around $54.30 before today’s results were announced.

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