Walgreen Co., the largest U.S. drugstore chain, reported a 19 percent increase in first-quarter profit, surpassing analysts’ projections and pushing the shares up the most in almost three months.
Walgreen said today that net income advanced to 62 cents a share, beating the 54-cent average of estimates compiled by Bloomberg. Prescription sales, which generated about two-thirds of total revenue, climbed 5.3 percent.
Walgreen remodeled stores to get rid of slower selling items, helping to lower inventories, Chief Financial Officer Wade Miquelon said on a conference call. The Deerfield, Illinois-based company, which competes with drug chains such as CVS Caremark Corp. and Rite Aid Corp., said it’s on track to meet its goal of lowering costs by $1 billion this year.
The shares climbed $2.02, or 5.5 percent, to $38.85 at 4 p.m. in New York Stock Exchange composite trading, the most since Sept. 28. They have advanced 5.8 percent this year.
Walgreen operates more than 7,600 stores across the U.S. Net income for the quarter ended Nov. 30 advanced to $580 million, from $489 million, or 49 cents, a year earlier, the company said in a statement.
Walgreen sales advanced 6 percent to $17.3 billion, matching the average analyst estimate. The drugstore chain has sought to expand in cities such as New York, with the acquisition of smaller rival Duane Reade Holdings Inc. this year. In April, Walgreen completed the acquisition of the 50-year-old chain, which then operated more than 250 stores in the New York area.
Gross margin, the fraction of sales left after the cost of goods sold, widened by 0.8 percentage point to 28.5 percent, Walgreen said. The company also benefited from generic drug sales and fewer inventory writedowns compared with a year earlier.