Walgreen Co. (WAG), the largest U.S. drugstore chain, said fiscal first-quarter profit dropped 25 percent, hurt by the loss of Express Scripts Holding Co. customers.
Net income in the quarter ended Nov. 30 fell to $413 million, or 43 cents a share, from $554 million, or 63 cents, a year earlier, the Deerfield, Illinois-based company said today in a statement. Excluding certain charges, profit totaled 58 cents a share.
Walgreen renewed a contract in July to provide Express Scripts customers with prescriptions, ending a standoff that caused it to lose shoppers to CVS Caremark Corp. (CVS) Walgreen Chief Executive Officer Greg Wasson has been working to win back sales with a customer loyalty program that started in September to coincide with the new contract.
“It will take time and aggressive discounts to win customers back,” Deborah Weinswig, an analyst at Citigroup Inc. in New York, wrote in a note today. She recommends selling the shares and said lower-than-expected recapture of Express Scripts prescriptions will hurt Walgreen’s same-store sales.
Walgreen fell 2.3 percent to $36.68 at 10 a.m. in New York. The shares advanced 14 percent this year through yesterday.
Sales in the quarter dropped 4.6 percent to $17.3 billion. The loss of Express Scripts customers contributed to a decline of 2 percent in “front-end” sales of general merchandise on a same-store basis, Chief Financial Officer Wade Miquelon told analysts today.
Prescription sales fell 4.8 percent on a comparable-store basis in the first quarter, less than the 8 percent drop in the previous quarter, after more than 45 million customers enrolled in Walgreen’s loyalty program.
“We have continued to see meaningful progress so far” in the second quarter on winning back Express Scripts prescriptions, Wasson said on the conference call. Walgreen expects to regain “a significant portion of these customers over time,” he said, without disclosing how many customers it has won back so far.
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