Walgreen fiscal 4th-qtr profit jumps 69 percent
Drugstore operator Walgreen Co. said Tuesday its fiscal fourth-quarter earnings jumped 69 percent, boosted in part by a gain from the $525-million sale of its pharmacy benefits management business.
The Deerfield, Ill., company said in March it was selling the business to Catalyst Health Solutions Inc. That deal was completed in June, and Walgreen recorded an after-tax gain in the quarter of 30 cents per share.
Walgreen also was helped by sales growth at stores open at least a year, as it earned $792 million, or 87 cents per share, in the quarter that ended Aug. 31. That compares with net income of $470 million, or 49 cents per share, in last year's quarter. Adjusted earnings, which exclude the sale gain, were 57 cents per share, and that topped Wall Street expectations.
Analysts surveyed by FactSet expected, on average, earnings per share of 55 cents for the quarter.
Walgreen said Tuesday its revenue climbed more than 6 percent in the quarter to $17.96 billion. Sales at stores open at least a year rose 4.4 percent.
Sales from locations open at least a year is a key indicator of a retailer's long-term health because it excludes stores that recently opened or closed.
Walgreen is the largest drugstore chain in the United States with more than 7,700 stores. For the full fiscal year, the company earned $2.71 billion, or $2.94 per share, on $72.18 billion in revenue.
Walgreen said when it reported third-quarter results that it was ending a relationship worth $5.3 billion per year with Express Scripts Inc. Walgreen said that the St. Louis company was not paying it enough money to fill prescriptions. It also complained that Express Scripts was trying to dictate terms of the partnership.
Pharmacy benefits managers, or PBMs, like Express Scripts pay Walgreen to fill prescriptions. The PBMs make money by reducing the costs in prescription drug plans. Walgreen had a similar contract fight last year with CVS Caremark Corp. that was eventually resolved.
The Express Scripts conflict intensified earlier this month. Walgreen said it plans to stop filling prescriptions managed by Express Scripts Inc. on Jan. 1. Express Scripts then announced that it was suing Walgreen. It argued that the drugstore chain is trying to lure away its customers.
Walgreen said Tuesday there has been "no substantive progress" in contract renewal negotiations with Express Scripts.
In premarket trading, Walgreen shares rose 91 cents, or 2.5 percent, to $36.94.