Walgreen Co. Reports 33rd Consecutive Year of Record Earnings, Sales.DEERFIELD, Ill. -- Walgreen Co. (NYSE NYSE See: New York Stock Exchange :WAG)(NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :WAG): * Fiscal year 2007 earnings increase 16.6 percent; sales grow 13.4 percent to record $53.8 billion * Fourth quarter earnings decrease 3.8 percent; diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of decrease 2.4 percent to 40 cents * Lower reimbursements on some generic drugs generic drug, a drug sold or prescribed under the nonproprietary name of its active ingredients or under a generally descriptive name rather than under a brand or trade name. and higher expenses impact fourth quarter profits * Record capital expenditures of more than $2 billion planned for fiscal 2008, primarily for new store openings that will reach 550 this year * Management expresses high confidence in business fundamentals business fundamentals The general background within which an economy operates including earnings, sales, wage rates, taxes, and inflation. Improving business fundamentals are generally viewed as bullish for stocks, although stock prices at any given point and overall growth, and a strong commitment to improving profitability Walgreens (NYSE:WAG)(NASDAQ:WAG) today announced its 33rd consecutive year of record earnings and sales. The company also reported a decline in fourth quarter earnings due in part to lower reimbursements on some popular generic drugs and higher expenses. Fiscal year net earnings increased 16.6 percent to $2.04 billion versus last year's $1.75 billion. Net earnings per share for fiscal 2007 increased 18.0 percent to $2.03 per share (diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ) versus $1.72 per share (diluted) the previous year. Net earnings for the fourth quarter declined 3.8 percent to $397 million or 40 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. (diluted) versus last year's $412 million or 41 cents per share (diluted). The LIFO (Last In-First Out) A queueing method in which the next item to be retrieved is the item most recently placed in the queue. Contrast with FIFO. LIFO - stack index increased in the fourth quarter because of higher than expected inflation among pharmacy pharmacy, art of compounding and dispensing drugs and medication. The term is also applied to an establishment used for such purposes. Until modern times medication was prepared and dispensed by the physician himself. In the 18th cent. inventories. As a result, while overall inflation was lower in 2007 than in 2006, the LIFO provision was $32.0 million this quarter versus $26.1 million in the year-ago period. "This quarter was negatively impacted by lower generic drug reimbursements, combined with higher salary and store expenses, and higher advertising costs," said Chairman Jeffrey A. Rein. "Our expenses weren't in line with the level of reimbursements we were receiving. Managing both expenses and lower reimbursements on some generic drugs is my top priority. We're going to fix this, and at the same time continue our aggressive growth plan." Generics such as simvastatin simvastatin /sim·va·stat·in/ (sim´vah-stat?in) an antihyperlipidemic agent that acts by inhibiting cholesterol synthesis, used in the treatment of hypercholesterolemia and other forms of dyslipidemia and to lower the risks associated (the generic version of Zocor) saw a significant reduction in gross profit dollars during the fourth quarter. Retail pharmacies This article is a list of major pharmacies (also known as chemists and drugstores) by country. Australia Pharmacies in Australia are mostly independently-owned by pharmacists, often operated as franchises of retail brands offered by the three major typically see the highest gross profit dollars in the first few months after a generic prescription drug prescription drug Prescription medication Pharmacology An FDA-approved drug which must, by federal law or regulation, be dispensed only pursuant to a prescription–eg, finished dose form and active ingredients subject to the provisos of the Federal Food, Drug, becomes available, and simvastatin entered the market in late June 2006. "In the case of some blockbuster block·bust·er n. 1. Something, such as a film or book, that sustains widespread popularity and achieves enormous sales. 2. A high-explosive bomb used for demolition purposes. 3. generic drugs, it's difficult to grow profit dollars after their first few months of availability," said President Greg Wasson. "As this quarter shows, pharmacy gross profit margins Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. on some drugs can increase on a percentage basis even while the gross profit dollars they produce fall." The company saw this play out to a significant factor in the fourth quarter. For example, Walgreens filled nearly three times as many prescriptions for simvastatin in this year's fourth quarter compared to the year-ago quarter, yet the company's gross profit dollars from the drug were virtually the same this year as they were a year ago. Sales rose 10.3 percent to $13.4 billion in the fourth quarter and 13.4 percent to $53.8 billion for the year. Total sales in comparable drugstores (those open more than a year) were up 6.3 percent for the quarter and 8.1 percent for the year, while front-end comparable drugstore sales rose 6.1 percent in the quarter and 5.8 percent for the year. For the 52-week period ending Aug. 11, Walgreens increased its market share in 59 of its top 60 product categories compared to food, drug and mass merchandise competitors, as measured by A.C. Nielsen. Prescription sales, which accounted for 65.0 percent of total sales in fiscal 2007, climbed 10.5 percent in the fourth quarter and 14.7 percent for the year. Prescription sales in comparable drugstores rose 6.5 percent in the quarter and 9.5 percent for the year, while the number of prescriptions filled in comparable drugstores rose 4.0 percent in the quarter and 5.7 percent for the year. "In the fourth quarter, we faced a tough comparison to the surge of Medicare Part D prescriptions we saw in 2006, the first year of that program," said Wasson. Overall, Walgreens filled 583 million prescriptions in fiscal 2007, an increase of 10.0 percent from the previous year. Walgreens now fills nearly 17 percent of all retail prescriptions in the country. Gross profit margins increased 34 basis points versus the year-ago quarter to 27.98 as a percent to sales, including the LIFO provision previously mentioned. Pharmacy margins increased, but some of that benefit was offset by an overall shift toward the pharmacy business, which carries lower margins than front-end merchandise. Margins on the front end also increased as a result of a shift in mix toward higher margin items. Fourth quarter selling, occupancy and administration expenses increased 103 basis points from the previous year, from 22.45 to 23.48 as a percent to sales, primarily due to increases in salaries and store expenses, and advertising costs. The impact of new, lower-cost generic drugs, which slowed pharmacy sales growth by 5.0 percentage points and total sales growth by 3.1 percentage points in the quarter, continued to affect expense ratios. The company benefited from a lower tax rate in this year's fourth quarter of 35.0 percent compared to 36.7 percent in the year-ago quarter, primarily the result of a lower effective state tax rate. Including acquisitions, Walgreens expansion program resulted in a record net gain of 536 new stores in fiscal 2007. As of Aug. 31, the company operated 5,997 stores in 48 states and Puerto Rico Puerto Rico (pwār`tō rē`kō), island (2005 est. pop. 3,917,000), 3,508 sq mi (9,086 sq km), West Indies, c.1,000 mi (1,610 km) SE of Miami, Fla. versus 5,461 a year ago, and anticipates opening 550 new stores in fiscal 2008, with a net increase of more than 475 stores after relocations and closings. Walgreens is on track to exceed its goal of operating 7,000 stores in 2010. "We have a three-part strategy for growth, and the first part is to continue what we do best - grow stores," said Wasson. "We're committed to organic store growth, yet at the same time we're more open to acquisitions when the right opportunity arises. "The second part of our growth strategy is expanding into adjacent sectors of pharmacy and health care service. For example, in August we acquired Option Care, Inc., a national specialty pharmacy and home infusion services provider. This move makes us the fourth-largest specialty pharmacy provider in the country and the largest home infusion provider. "The final part of our growth strategy is using our existing store space to drive customer traffic through new services like printer cartridge (1) See phono cartridge. (2) A removable storage module that contains magnetic disks, optical discs, magnetic tape or memory chips. Cartridges are inserted into slots in the drive, printer or computer. refills and convenient care clinics. We have more than 65 clinics open today, and by the end of calendar 2008 our goal is to have more than 400." Take Care Health Systems, the wholly-owned subsidiary of Walgreens that manages the clinics, is opening clinics in nine new markets this fall, including Cincinnati, Cleveland, Houston, Las Vegas Las Vegas (läs vā`gəs), city (1990 pop. 258,295), seat of Clark co., S Nev.; inc. 1911. It is the largest city in Nevada and the center of one of the fastest-growing urban areas in the United States. , Miami, Nashville, Tenn., Orlando, Fla., Tampa, Fla. and Tucson, Ariz. Combined with expansion in existing markets, up to 100 new Take Care Health Clinics will open this fall. Walgreens estimates more than $2 billion in capital investments for fiscal 2008. This reflects expenditures for new stores, technology and a new distribution center in Connecticut scheduled to open in fiscal 2009. For additional information on the quarter's results, investors can listen to a recorded Webcast on Walgreens Investor Relations Investor relations The process by which the corporation communicates with its investors. Web site at: http://investor.walgreens.com. This news release may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , as amended, which Note is incorporated into this news release by reference. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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