Walgreen Sinks After Profit Trails Estimates
Walgreen Co. (WAG), the largest U.S. drugstore retailer, fell the most in a year and a half after fiscal third-quarter profit trailed analysts’ estimates because of declining sales at established stores.
The shares tumbled 7.2 percent to $44.57 at 9:55 a.m. in New York after dropping as much as 7.7 percent, the biggest intraday decline since Dec. 21, 2011. Walgreen gained 30 percent this year through yesterday, compared with a 10 percent increase for the Standard & Poor’s 500 Index.
Excluding some items, profit in the quarter ended May 31 was 85 cents a share, the Deerfield, Illinois-based company said today in a statement. The average of 19 analysts’ estimates compiled by Bloomberg was 91 cents.
Sales at stores open at least 12 months dropped 3.9 percent as Walgreen tries to win back customers after a contract dispute with Express Scripts Holding Co. (ESRX) sent sales to rivals including CVS Caremark Corp. (CVS) Walgreen has gotten back about 40 percent of its customers since renewing its contract with Express Scripts in September, according to David Magee, an analyst with SunTrust Banks Inc. (STI) in Atlanta.
“We do not expect all of those former customers to return to Walgreens,” Meredith Adler, an analyst at Barclays Plc in New York, wrote in a note June 20. She rates the shares equalweight, the equivalent of a hold.
A reduction in promotions also hurt store traffic, Chief Financial Officer Wade Miquelon told analysts today on a conference call.
Walgreen said net income in the quarter increased 16 percent to $624 million, or 65 cents a share, from $537 million, or 62 cents, a year earlier. Sales advanced 3.2 percent to $18.3 billion.
(The company held a conference call for analysts today. For a replay, click WAG US <Equity> EVT <GO>.)
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