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Quarterly results mixed at Walgreens, Rite Aid
June 23rd, 2010
NEW YORK – Drug store chains Walgreen Co. and Rite Aid Corp. turned in uneven performances this week in their latest quarterly financial reports.
Despite an uptick in sales, Walgreens saw its fiscal 2010 third-quarter earnings drop due in part to special charges and the loss of a key tax benefit. The earnings result fell short of Wall Street's expectations.
Meanwhile, Rite Aid's sales dipped in its fiscal 2011 first quarter, but the drug store chain recorded a smaller year-over-year loss and topped analysts' earnings forecast.
Walgreens said Tuesday that net earnings for the quarter ended May 31 totaled $463 million, or 47 cents per diluted share, compared with $522 million, or 53 cents per diluted share, a year earlier. For Walgreens' 2010 third quarter, Thomson Financial reported an average analyst estimate of 57 cents per share.
Walgreens noted that third-quarter earnings reflect a negative impact of 4 cents per diluted share from the elimination of the tax benefit for the Medicare Part D subsidy for retiree benefits, which resulted from the enactment of the Patient Protection and Affordable Care Act. The after-tax income tax charge totaled $43 million, the company said.
Also in the third quarter, Walgreens reported a negative impact of 2 cents per diluted share from costs associated with the Duane Reade acquisition and 1 cent per diluted share in restructuring and restructuring-related costs associated with the company's Rewiring for Growth initiative.
On the revenue side, Walgreens' 2010 third-quarter sales increased 6.1% to $17.2 billion from $16.2 billion a year earlier. Same-store sales edged up 0.7%. Duane Reade stores aren't included in same-store results.
Walgreens said front-end sales were impacted by continued weak demand for discretionary goods and lower demand for flu-related products versus the year-ago quarter.
"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," Walgreens president and chief executive officer Greg Wasson said in a statement. "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."
At Rite Aid, the net loss for the 13-week first quarter ended May 29 was $73.7 million, or 9 cents per diluted share, compared with $98.4 million, or 11 per diluted share, a year earlier. A decrease in selling, general and administrative (SG&A) expenses and lower charges related to store closings contributed to decreased net loss, according to Rite Aid.
Rite Aid's loss in the quarter came in smaller than the projected range of financial analysts. The average analyst estimate was for a loss of 14 cents per share, with the forecast ranging from a low of 16 cents to a high of 10 cents, Thomson Financial reported.
In the meantime, Rite Aid saw revenue dip 2.1% to $6.4 billion in the 2011 first quarter from $6.5 billion a year ago. The retailer attributed the decrease to store closings and a 1% decline in same-store sales during the quarter.
"We accomplished a lot in the first quarter. Our team continued to improve operational efficiency to help offset the challenging economic and competitive environment impacting sales and margin," Rite Aid chairman and CEO Mary Sammons said in a statement.
The stock prices of both drug chains are near their 52-week lows. As of late morning trading Wednesday, Walgreens shares were down 2 cents to $28.15, compared with a 52-week low of $27.89. Rite Aid shares were up 8 cents to $1.09, versus a 52-week low of 95 cents.