Walgreen Profit Up on Generic Drug Sales

Tuesday, December 27th 2005, 11:50 am

By: News On 6

DEERFIELD, Ill. (AP) _ Walgreen Co., the nation's biggest drugstore chain by sales, said Tuesday that profit increased 5 percent in its fiscal first quarter, helped by higher generic drug sales.

The drugstore chain earned $345.6 million, or 34 cents per share, in the three months ended Nov. 30, up from $328.6 million, or 32 cents per share, a year ago. Excluding stock options expensing, Walgreen said it would have earned 36 cents per share.

Revenue grew 10 percent to $10.9 billion from $9.89 billion. Same-store sales at locations open at least a year increased 7.2 percent for the period.

Analysts expected earnings on average of 33 cents per share, on sales of $11.02 billion, according to a Thomson Financial survey.

Walgreen shares, which gained 15 percent in 2005, rose 37 cents to $44.63 in early trading on the New York Stock Exchange.

Walgreen said prescription revenue, which accounts for about 65 percent of its sales, rose 10 percent overall and almost 8 percent at pre-existing stores. The drugstore firm added that its profit margin increased slightly to about 27.5 percent of sales because of growth in generic drug sales, though this was partly offset by a shift to lower profit-margin products outside its pharmacy operations. Walgreen said the lower-priced generic drugs also ``slowed the company's sales line.''

Expenses for selling, occupancy and administration increased slightly. The company attributed this to stock options expensing, higher store salaries and the absence of a gain from litigation settlements that occurred in the previous year.

The company operates about 5,100 stores in 45 states and Puerto Rico. Rick Hans, director of finance, said Walgreen remains on track to reach its goal of 7,000 stores by 2010.