Walgreens beats analysts' forecasts
Walgreens on Tuesday reported fiscal first-quarter earnings of $809 million that beat analysts' expectations.
Tuesday's earnings call for the Deerfield, Illinois-based company, also marked the end of its controversial CEO Greg Wasson's tenure. Walgreens and Wasson spent much of the last year making not-so-favorable news with the announcement of its planned takeover of the Swiss beauty and health company Alliance Boots and consideration of a corporate move to Switzerland to avoid taxes.
Walgreens ultimately decided against this so-called inversion, but pushed forward with the merger to give it a huge foothold in the interational market.
Wasson said that based on "everything I've known for the past 35 years," the deal would "change the face of the global pharmacy" business."
Walgreens said it had profit of 85 cents per share. Adjusted earnings were 81 cents per share, topping analysts' estimates of 74 cents per share.
The drugstore chain posted revenue of $19.55 billion in the period, which also beat analysts' forecasts of $19.43 billion, according to Zacks Investment Research.
Walgreens share were up $1, or 1.4%, in pre-market trading.
Walgreen shares have climbed 29% since the beginning of the year, while the Standard & Poor's 500 index has climbed 12%. The stock has increased 26% in the last 12 months.
Wasson called the results "solid performance" for both pharmacy and retail products.
"We truly appreciate that our 8,200-plus store teams exceeded the overall retail market in year-over-year sales growth heading into the holiday season, as we grew gross profit dollars faster than our costs during the quarter," Wasson said in a press release.
The company's gross profit was negatively impacted by lower third-party reimbursement and generic drug price inflation, as it says was expected. This was partially offset by an increase in the number of brand name drugs with generic versions compared to the same quarter a year ago.
CFO Tim McLevish said he was pleased with the progress the company was making, but not that while profit margins and shopping basket size was up, profit is down. He says the company is working to enhance its product mix to add more upscale products, which carry a higher margin, and addressing "ongoing generic drug inflation."
Weakness is pharmacy sales and only partially offset by gains on general retail, he said.
For the quarter Walgreens says its pharmacy and retail business benefited from purchasing synergies through its joint venture with the well known Alliance Boots, which it owned 45% of. The deal, under which Walgreens will own the company in full, is expected to close Dec. 31.
The deal and Walgreens general earnings prompted Wasson to conclude his last earnings call Tuesday by saying "the best is yet to come."
Contributing: Associated Press