Drugstore operator Walgreen Co. said Tuesday its fourth-quarter profit fell 2 percent, but prescription drugs drove sales higher and the results topped Wall Street expectations despite high unemployment and a weak economy.
The Deerfield, Ill.-based company earned $436 million, or 44 cents per share, down from profit of $443 million, or 45 cents per share, a year prior. Sales in the quarter ended in August rose 8 percent to $15.7 billion from $14.6 billion. The latest per-share results include 3 cents in costs, offset by 7 cents in savings.
Thomson Reuters says analyst forecast profit of 39 cents per share on revenue of $15.68 billion, on average.
Same-store sales, or sales at stores open for more than a year, rose 2.4 percent. Walgreen opened its 7,000th store in September and currently runs 7,042 drugstores, a few dozen more than rival CVS Caremark Corp. It also has hundreds of walk-in retail clinics, specialty pharmacies, and work site health centers.
Prescription drug sales rose 4.5 percent in stores open at least a year, while front-end same-store sales fell 1.4 percent.
"We posted solid fourth-quarter results, while continuing to advance one of the most important strategic and operational transformations in our company's history," said President and CEO Greg Wasson, in a statement. "And we've done this while navigating through the most severe economic downturn in decades."
Chief Financial Officer Wade Miquelon said profit margins at pharmacies improved, but those gains were canceled out by weaker sales of other products, greater discounting, and other costs.
The company also said patients who receive 90-day orders of prescription drugs through the mail will also be able to pick up their orders at Walgreen pharmacies. CVS Caremark has a similar program.
For the full year, Walgreen earned $2 billion, or $2.02 per share, down from profit of $2.16 billion, or $2.17 per share, in 2008. Revenue rose to $63.34 billion from $59.03 billion.
The company is looking to save money by cutting back on store openings and carrying fewer products, and boost sales by improving the layout of its stores. Walgreen said it plans to start selling beer and wine at stores over the next year to 18 months, and the company is rolling out its Customer Centric Retailing initiative at 400 stores in Texas.
Wasson said stores that are remodeled under Customer Centric Retailing have better sightlines and are better looking, and the company thinks sales will improve at those locations.
Walgreen expects store growth of 4.5 percent to 5 percent in fiscal 2010, which would give it more than 7,300 stores.