Tuesday, December 21, 2010

Walgreen Co. (NYSE: WAG): Q1 Earnings Preview 2011

Walgreen Co. (NYSE: WAG), the largest US drugstore chain, is scheduled to release its fiscal first-quarter earnings before the opening bell on Wednesday, December 22, 2010. Analysts, on average, expect the company to report earnings of 53 cents per share on revenue of $17.29 billion. In the year ago quarter, the company reported earnings of 49 per share on revenue of $16.36 billion.

Walgreen Co., together with its subsidiaries, engages in the operation of a chain of drugstores in the United States. The Company provides its customers with multichannel access to consumer goods and services, and pharmacy, health and wellness services in communities across America. As of November 30, Walgreens operated 8,131 locations in all 50 states, the District of Columbia, Puerto Rico and Guam. . 

In the preceding fiscal fourth-quarter, the Deerfield, Illinois based company's net income was $470 million, or 49 cents a share, compared to $436 million, or 44 cents a share, in the year-earlier quarter. On an adjusted basis, the company earned 54 cents a share in the latest quarter. Revenue grew 7.4% to $16.9 billion from $15.7 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 44 cents per share on revenue of $16.84 billion. Gross profit margins increased 70 basis points to 28.4 percent versus the year-ago quarter of 27.7 percent.

Early in December, the company said that total sales for the first quarter of fiscal 2011 were $17.33 billion, up 5.9 percent from $16.36 billion in the first quarter of fiscal 2010. Comparable store sales for the fiscal 2011 first quarter increased 0.8 percent, while front-end comparable store sales for the quarter increased 0.4 percent. Prescriptions filled at comparable stores increased 2.2 percent in the first quarter. 

The drugstore giant is seeking to to enhance the customer experience by remodeling nearly three-quarters of its stores. converted or opened more than 1500 stores to our Customer-Centric Retailing or CCR format. During fiscal 2010, Walgreen had converted or opened 1,500 stores to the CCR format, bringing the total number to more than 1,800. By the end of calendar year 2010, the company plans to have over 2,000 CCR stores. Moreover, beer and wine has been rolled out in 4,200 stores, which will be expanded to 5,000 by the end of 2010.

The company is steadily improving its cost structure. The company expects cost reduction and productivity efforts to provide $1 billion  in annual savings by fiscal 2011. Even while slowing store openings, Walgreens retail pharmacy market share has grown from 18.2 percent in 2008 to 19.5 percent. The company filled a record 778 million prescriptions in fiscal 2010, up 15 percent since 2008.

Walgreens has slowed the pace of new store openings from 9 percent growth in 2008 to 4.2 percent in 2010. Going forward, the company expects growth of between 2.5 and 3 percent in fiscal 2011, which will still result in more store openings than any of its drugstore competitors.

During the quarter under review, the company's board of directors authorized a new $1 billion share repurchase program, which will expire at the end of 2012. The board also declared a regular quarterly dividend of $0.175 per share, a 27.3% increase over the year-ago dividend. The dividend increase nicely signals management's confidence in their ability to grow the business over time, as well as a willingness to return more capital to shareholders through buybacks and dividends. In the past two years, Walgreens has returned more than $2.6 billion to shareholders in the forms of dividends and share repurchases. 

In terms of stock performance, Walgreen shares have gained nearly 2% since the beginning of the year. 

Full Disclosure: None.
Related Posts with Thumbnails

Wikinvest Wire