Walgreens' Q1 income rises 30.6% due to higher retail sales
Walgreens Boots Alliance, the drugstore chain operator, said Thursday its fiscal first quarter net income rose 30.6% from a year ago as it reported higher retail sales.
Net income for the Deerfield, Ill.-based company was $1.1 billion vs. $850 million a year ago. Earnings per share for the three month-period that ended Nov. 30, after adjusting for some items, totaled $1.01 compared with 89 cents a year ago. Analysts polled by Zacks Investment Research estimated 97 cents of per-share profit.
Sales increased 48.5% to $29 billion.
Walgreens also raised by 5 cents the low end of its adjusted per-share earnings guidance for fiscal year 2016 to $4.30 to $4.55.
"The year has started with a comparatively strong first quarter, as we expected,” said CEO Stefano Pessina in a statement. “Our ongoing work to control costs across Walgreens Boots Alliance and improve adjusted operating income margins is growing earnings overall. Although it is early in the year, we are on track to deliver against our expectations.”
Shares of Walgreens rose 1.2% to $80.58 in morning trading.
With baby boomers aging and demand for pharmaceutical products rising, larger drugstore chains are looking to consolidate to boost their buying power and leverage against insurers. In October, Walgreens agreed to buy competitor Rite Aid for $17.2 billion, a deal that combines the nation's second and third largest pharmacy chains. The combined company will have about 13,000 U.S. stores, leaping ahead of the current market leader, CVS.
In 2014, Walgreens also paid about $15.3 billion to buy shares of European pharmacy chain Alliance Boots that it doesn’t already own. Savings from combining with Alliance Boots were $288 million in the first quarter, it said.
Walgreens and Rite Aid each received a request for additional information from the Federal Trade Commission for the proposed acquisition, but it was "expected" and the deal is "progressing as planned," Walgreens said. Walgreens continues to expect the transaction to close in the second half of calendar 2016.
The U.S. retail pharmacy division, whose principal brands are Walgreens and Duane Reade, reported a 4.2% sales increase to $20.4 billion. Pharmacy sales, which accounted for 68.4% of total division sales, rose 6.7% partly due to growth in Medicare Part D and in-store services.
Sales of its retail pharmacy international division totaled $3.5 billion, with comparable store sales rising 2.2%.