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DEERFIELD, Ill., March 26, 2007 – Walgreen Co. (NYSE, NASDAQ: WAG) today announced record fiscal year 2007 second quarter and first half sales and earnings.
Net earnings for the quarter ended Feb. 28 were up 24.5 percent to $652 million or 65 cents per share (diluted), from $524 million or 51 cents per share (diluted) in the same quarter a year ago.
First half net earnings climbed 24.7 percent to $1.08 billion or $1.07 per share (diluted) versus last year's $869 million or 85 cents per share (diluted).
Sales increased 14.6 percent to a record $13.9 billion for the second quarter and 15.5 percent to $26.6 billion for the first half. Total sales in comparable stores (those open more than a year) were up 8.9 percent in the quarter, while front-end comparable drugstore sales rose 5.7 percent in the quarter.
Prescription sales, which accounted for 62.4 percent of sales in the quarter, climbed 16.4 percent. Prescription sales in comparable stores rose 10.9 percent in the quarter, while the number of prescriptions filled in comparable stores increased 6.3 percent. Third party plans now account for 94.7 percent of all prescription sales.
"Our growth in retail prescriptions filled in the quarter continued to outpace the growth in both the retail pharmacy and mail service pharmacy industries," said President and CEO Jeffrey A. Rein. "We posted very good gains in prescriptions filled at comparable stores even though this winter saw fewer than normal doctor visits due to the flu, the same scenario we experienced a year ago.
"Meanwhile, we saw solid sales increases in the front-end of the store, especially during the Christmas season."
For the 52-week period ending Jan. 27, Walgreens increased its market share in 58 of its top 60 product categories compared to food, drug and mass merchandise competitors, as measured by A.C. Nielsen.
Gross profit margins increased 52 basis points versus the year-ago quarter to 28.96 as a percent to sales. Although pharmacy margins increased with the growth in generic drug sales, some of that benefit was offset by an overall sales shift toward the pharmacy business, which carries lower margins than front-end merchandise. Margins for the front-end increased as a result of a shift in sales mix to higher margin items.
Walgreens decreased its LIFO inflation index in the second quarter, resulting in a LIFO provision of $13.4 million this quarter versus a provision of $23.8 million in the year-ago period. The lower index reflects less inflation than anticipated among pharmacy inventories.
Selling, occupancy and administration expenses decreased 5 basis points in the quarter to 21.64 as a percent to sales. Among the factors for the decrease were lower occupancy costs, including store closing costs, as a percent to sales. Partially offsetting those factors were provisions for legal matters.
During the quarter, Walgreens:
At Feb. 28, Walgreens operated 5,641 stores in 48 states and Puerto Rico. Walgreens plans 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.
