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DEERFIELD, Ill., Dec. 22, 2006 – Walgreen Co. (NYSE, NASDAQ: WAG) today announced record sales and earnings for the first quarter of fiscal year 2007.
Net earnings for the quarter ended Nov. 30 were up 24.9 percent to $432 million or 43 cents per share (diluted), from $346 million or 34 cents per share (diluted) in the same quarter a year ago.
Walgreens repurchased 7.9 million shares of stock for $343 million in the quarter. That completed the company's four-year, $1 billion share repurchase plan, 18 months ahead of schedule.
Sales for the first quarter increased 16.6 percent to a record $12.7 billion. Total sales in comparable stores (those open more than a year) were up 9.7 percent in the quarter, while front-end comparable drugstore sales rose 5.8 percent in the quarter.
Prescription sales, which accounted for 65.7 percent of sales in the quarter, climbed 18.7 percent. Prescription sales in comparable stores rose 11.9 percent in the quarter, while the number of prescriptions filled in comparable stores increased 7.4 percent. Third party plans now account for 94.6 percent of all prescription sales.
"This quarter's results show the strength of our core drugstore business," said Chairman Dave Bernauer. "They also demonstrate our success in attracting new pharmacy patients under
the Medicare Part D drug benefit. These patients are looking for a trusted pharmacy that's convenient and has the extra services they need, which are exactly the areas in which we excel."
Gross profit margins were up 60 basis points versus the year-ago quarter to 28.14 as a percent to sales, due in part to growth in generic drug sales and an increase in front-end margins. Some of that benefit, however, was offset by lower margins under the Medicare Part D program and by an overall sales shift toward the pharmacy business, which carries lower margins than front-end merchandise.
"We're earning less money on prescriptions for Medicare Part D patients who previously paid cash for their medications, but overall the program has benefited us because of the increased business we're attracting under it," said President and CEO Jeffrey A. Rein.
Selling, occupancy and administration expenses as a percent to sales increased 28 basis points to 22.85. The increase resulted from costs associated with acquisitions and provisions for legal matters. Partially offsetting those factors were lower store salary and occupancy costs as a percent of sales. Also impacting the SO&A ratio were lower-priced generic drugs that slowed the company's sales line.
"Our store managers helped generate strong sales growth while controlling their costs, and their staffs did an excellent job of maintaining high customer service levels," said Rein.
Walgreens opened a first-quarter record 143 new stores, including five acquired stores, for a net increase after relocations and closings of 119 stores. The company plans to open 500 new stores during fiscal 2007, for a net increase after relocations and closings of more than 400 stores.
At Nov. 30, Walgreens operated 5,580 stores in 47 states and Puerto Rico, including 76 Happy Harry's stores in Delaware and surrounding states. Walgreens is on track to operate more than 7,000 stores in 2010.
For additional information on the quarter's results, investors can listen to a recorded Webcast discussion on Walgreens Investor Relations Web site at: http://investor.walgreens.com.
This news release may contain forward-looking statements that involve risks and uncertainties. The following factors could cause results to differ materially from management expectations as projected in such forward-looking statements: seasonal variations, competition, risks of new business areas, the availability and cost of real estate and construction, and changes in federal or state legislation or regulations. Investors are referred to the "Cautionary Note Regarding Forward-Looking Statements" in the Company's most recent Form 10-K, as amended, which Note is incorporated into this news release by reference.
