Tags: generic | drugs | Walgreen | profit

Fewer New Generic Drugs Dent Walgreen Profit

Tuesday, 25 Mar 2014 10:18 AM

Walgreen Co. on Tuesday reported a lower-than-expected quarterly profit as a slowdown in the introduction of higher-profit generic medicines and a milder flu season cut into its gross profit margin.

The operator of the largest U.S. drugstore chain said its profit also came under pressure from price cuts implemented to compete with rivals during a tough holiday season for retailers.

Net income slipped to $754 million, or 78 cents per share, in the second quarter ended Feb. 28, from $756 million, or 79 cents per share, a year earlier.

Excluding one-time costs, Walgreen had a profit of 91 cents a share, two cents below Wall Street estimates, according to Thomson Reuters I/B/E/S.

The company's gross profit margin fell 1.3 percentage points to 28.8 percent of sales.

Chief Executive Greg Wasson said pressure from fewer new generic drugs would ease in the second half of its fiscal year. Walgreen also bumped up its estimate for the cost savings and enhanced revenue from its partnership with Alliance Boots Holdings Ltd., which runs Europe's largest pharmacy chain.

Walgreen said combining the chains' drug purchases and selling the European company's products in its stores would lead to so-called synergies of between $375 million and $425 million in this second year of their partnership, up $25 million from its earlier estimate.

The U.S. company bought 45 percent of Alliance Boots in 2012 with an option to buy the rest in 2015.

Sales rose 5.1 percent to $19.61 billion. Walgreen's sales at stores open at least a year rose 4.3 percent in the quarter, led by gains in prescription sales, which generate almost two-thirds of company revenue.

Comparable sales of general merchandise rose a more modest 2 percent, hurt by fewer shoppers coming into Walgreen's drugstores.

© 2017 Thomson/Reuters. All rights reserved.

   
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Walgreen Co. on Tuesday reported a lower-than-expected quarterly profit as a slowdown in the introduction of higher-profit generic medicines and a milder flu season cut into its gross profit margin.
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2014-18-25
Tuesday, 25 Mar 2014 10:18 AM
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