Walgreen 1Q profit jumps 18.8 percent

By The Associated Press

Walgreen(WAG), the nation's largest drugstore operator, said Wednesday that its net income jumped 19% in the fiscal first quarter as it remodeled thousands of stores and promotions were more successful.

After months of uneven results, the greater profit and reduced discounts indicated the company's plans to renovate most of its stores and simplify its product inventory may be paying off.

The Deerfield, Ill., company said net income rose to $580 million, or 62 cents a share, from $489 million, or 49 cents a share. Revenue rose 6% to $17.34 billion from $16.36 billion. The quarter ended Nov. 30.

Analysts surveyed by Thomson Reuters expected a profit of 54 cents a share on revenue of $17.31 billion, on average.

Walgreen said store remodeling improved sales, and write-downs decreased sharply. It reported $1 million in write-downs related to the Customer Centric Retailing plans in its latest quarter, compared with $28 million a year ago. It said customers spent more at its stores than they did in the year-ago quarter and promotions were more successful.

The company also boosted results by buying back $510 million in stock during the quarter. That cut the number of shares on the market and increased per-share profit.

Sales at stores open at least a year rose 0.8% during the quarter, Walgreen said. Sales of front-end items like cosmetics were up 0.4% and pharmacy revenue grew 0.9%. Sales at stores open at least a year is considered a key measurement of retailer health because it excludes results from stores that have been acquired, opened or closed over the last year from the comparison. The revenue figure doesn't include Duane Reade, which was acquired in April.

The company said front-end sales benefited from better promotions and pricing, while generic drug sales gave the pharmacy a boost. The company also administered about 5.6 million flu shots through Nov. 30, a slight increase from last year's first quarter. Walgreen said it is the largest provider of flu shots in the U.S. except for the federal government.

Gross profit margins improved by 80 basis points to 28.5%.

Walgreen ran 7,651 stores as of Nov. 30. It has added about 500 stores over the past year, with about half coming after it bought the Duane Reade chain in New York.

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