Walgreen 2nd-quarter profit rise as more customers fill 90-day prescriptions

Walgreen 2Q profit up as prescription sales rise

NEW YORK — Walgreen Co., the largest U.S. drugstore chain, said Tuesday that even while the flu season has tapered off dramatically, its profit rose 4.5 percent during its fiscal second quarter as its prescription drug sales rose.

The steep and unanticipated drop-off in sales of flu shots and cough and cold products — as well as costs connected to store remodeling and inventory changes — dragged the results below Wall Street’s expectations.

The company said it sold about 2 million flu shots in December, January and February, less than half the 5 million it administered over the three previous months but more than the 1.2 million it gave during the 2008-09 flu season.

Walgreen cited federal statistics in saying the percentage of doctor visits that were for flu symptoms fell to 1.8 percent in late February, from a record 7.7 percent in late October.

The company said it earned $669 million, or 68 cents per share, in the second quarter, up from $640 million, or 65 cents per share, a year earlier. Restructuring expenses reduced its profit by 2 cents per share. Revenue rose 3.1 percent to $16.99 billion from $16.48 billion.

Analysts surveyed by Thomson Reuters, who typically exclude one-time costs like restructuring, on average expected Walgreen to earn 71 cents per share on $17.17 billion in revenue.

Earlier this month, the company suggested its second-quarter would be just under $17 billion. Wall Street’s expectations have come down in the last few weeks, but analyst estimates did not fully reflect that result.

Walgreen shares rose 58 cents, or 1.6 percent, to close at $35.91 Tuesday.

The Deerfield, Ill., company’s revenue from flu vaccinations and flu-related products slowed even though late February is usually the peak of the flu season.

“As much as the early flu season helped our first-quarter results, it hurt our second-quarter results,” said President and CEO Greg Wasson.

Walgreen’s prescription revenue increased 3.2 percent as more customers filled 90-day prescriptions but just under 1 percent at stores open at least a year. Sales of other items, like magazines, cosmetics, and food, fell 1.6 percent at stores open at least a year.

The company’s overall sales at stores that had been open at least a year — considered a key gauge for retailers because it is not skewed by stores opening or closing — fell 0.2 percent.

The company gave new details on its remodeling plans on Tuesday. It said it is devoting more store space to key product categories like skin care and vitamins, and reducing the variety of products it carries so it can stock more of the best-selling items. It also said it is changing stores’ look to make them feel more spacious and pleasant, with clearer sight lines and lower shelves.

Walgreen also is in the midst of buying New York City drugstore chain Duane Reade in a deal announced in February that will make Walgreen the leading drugstore operator in the city.

Walgreen acquired or opened 41 stores during the quarter, and closed or relocated 8 stores. At the end of February, it ran 7,180 stores in all 50 states, along with Puerto Rico, Guam, and Washington, DC. The company also has 500 work site health centers, home care facilities, and specialty and other pharmacies.