Walgreen Co. (NYSE: WAG) reported second-quarter fiscal 2014 results before markets opened Tuesday. The drugstore chain reported adjusted diluted earnings per share (EPS) of $0.91 on revenues of $19.60 billion. In the same period a year ago, Walgreen reported EPS of $0.96 on revenue of $18.65 billion. Second-quarter results also compare to the consensus estimates for EPS of $0.93 and $19.61 billion in revenue.
Front-end (i.e., non-prescription) same-store sales rose 2% in the second quarter and total sales rose 4.3%. Traffic was down 1.4% though basket size rose by 3.4%.
Prescription sales accounted for 62.2% of sales in the second quarter and were up 7% year-over-year. Same-store prescription sales were up 5.2%. At the end of February Walgreen claimed 19% of the U.S. market for retail prescriptions.
Walgreen did not offer guidance in its earnings release, but the consensus estimate for the company’s third quarter calls for EPS of $0.94 on revenues of $19.19 billion. For the full year, the consensus estimate for EPS is $3.46 on revenues of $75.81 billion.
The company’s CEO said:
Our second quarter performance, in spite of expected headwinds from slower generic drug introductions, comparisons with last year’s flu season and severe weather, was marked by solid top-line growth driven by record quarterly sales and record second-quarter prescriptions filled. We also continued to gain prescription market share while we maintained a firm hold on our costs.
What CEO Greg Wasson could have said is that Walgreen is gaining back prescription market share after the 2012 dispute with pharmacy benefits management firm Express Scripts Holding Co. (NASDAQ: ESRX). Walgreen lost millions of customers and a substantial portion of its prescription sales before the two companies kissed and made up.
Gross margins slipped by 1.3% to 28.8%, compared with the second quarter of last year. The company attributed the decline to “the shift in the generic drug wave from a peak in the prior year to a trough in the first half of fiscal 2014.” Front-end margins were also lower because Walgreen “invested in promotions.”
Shares were down about 0.2% in premarket trading Tuesday, at $64.20 in a 52-week range of $43.31 to $69.84. Thomson Reuters had a consensus analyst price target of around $69.50 before the results were announced.
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