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The top performers set standard for industry.

NEW YORK -- Walgreen Co. solidified its position as the chain drug industry's perennial earnings leader by racking up more than $1.5 billion in net income during its last full fiscal year.

As the trade class' most profitable company, Walgreens' $1.56 billion in profits was $200 million more than the chain earned in the previous year.

Rite Aid Corp., helped by a huge income tax benefit of $1.23 billion, was second on the list with $1.27 billion in net income. CVS Corp. also topped the $1 billion mark with $1.22 billion in earnings.

The three companies' results marked the first time that more than a single drug store operator has recorded in excess of $1 billion in net profits for a given year.

The five chains with the highest net income have not changed over the course of the past year. However, Rite Aid's tax windfall helped propel it from fourth on the list to second. CVS, Albertsons Inc. (which also operates supermarkets and food/drug combination stores in addition to stand-alone drug stores) and Shoppers Drug Mart (SDM) round out the rankings.

The tax break also helped Rite Aid top the listing of chains with the highest margins.

Rite Aid saw its net margin soar from 1.8% a year ago to 7.3% in 2005 while its gross margin inched up from 25% to 27.2%.

Last year's No. 2 margin leader--the Jean Coutu Group--fell out of the rankings in 2005 as its performance was dragged down by the acquisition of more than 1,500 Eckerd stores in late 2004. The chain was replaced on the list by Longs Drug Stores.

Coutu's lackluster performance also caused the company to fall from first to sixth on the list of drug chains with the best return-on-investment numbers.

In 2004 Coutu had topped the R-O-I rankings with a 20.7% return. In 2005 that rate of return fell to 7.4% as Walgreens supplanted the Canadian chain at the top the list with a 17.5% return.

SDM and CVS were close behind with R-O-I of 15.3% and 14.6%, respectively.

Industry leaders--2005

Net income (1)

Walgreens            $1.56 bil.
Rite Aid             1.27 bil.
CVS                  1.22 bil.
Albertsons           462.0 mil.
Shoppers Drug Mart   316.0 mil.

Gross margin (3)

Albertsons         28.1%
Walgreens          27.9%
Rite Aid           27.2%
CVS                26.8%
Longs              25.7%

Net margin (2)

Rite Aid              7.3%
Shoppers Drug Mart    5.1%
Walgreens             3.7%
CVS                   3.3%
Longs                 1.6%

R-0-1 (4)

Walgreens            17.5%
Shoppers Drug Mart   15.3%
CVS                  14.6%
Longs                 9.6%
Albertsons            8.1%
Jean Coutu            7.4%

(1.) Fiscal year. All in U.S. dollars. Shoppers Drug Mart is translated
using the rate as of April 5, 2006. Rite Aid's net income reflects an
income tax benefit of $1.23 billion arising from a reduction of a
valuation allowance against deferred tax assets.

(2.) Fiscal year. Rite Aid's net margin reflects an income tax benefit
of $1.23 billion arising from a reduction of a valuation allowance
against deferred tax assets.

(3.) Fiscal year. Reported margins are not necessarily comparable. In
many cases gross margins take into account store occupancy costs,
warehousing, delivery and buying expenses.

(4.) Fiscal year, based on year-end shareholders equity.

Source: Racher Press research.
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Title Annotation:drug stores rankings according to their earnings
Comment:The top performers set standard for industry.(drug stores rankings according to their earnings)
Publication:Chain Drug Review
Article Type:Industry ranking
Geographic Code:1USA
Date:May 1, 2006
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