Drugstore operator Walgreen Co., which has stores and a distribution facility in Connecticut, said today its profit fell 9 percent in the fiscal third quarter despite improving sales as greater expenses, including its reorganization efforts, reduced its income.
Deerfield, Ill.-based Walgreen aims to cut its annual expenses by $1 billion starting in 2011, which is adding to its costs this year. In the quarter ended May 31, it earned $522 million, or 53 cents per share, down from $572 million, or 58 cents per share.
Analysts were expecting 56 cents per share, according to a poll by Thomson Reuters. Revenue grew 8 percent to $16.21 billion from $15.02 billion. Analysts forecast $16.16 billion in revenue, on average.
Gross margins declined 0.8 percentage points to 27.5 percent.
Walgreen opened in April a regional distribution facility in Windsor.
At 11 a.m., Walgreen shares fell $1.29, or 4.1 percent, to $30.14.
The company’s selling, general and administrative expenses rose 8 percent during the quarter, which included 1 percentage point from its savings plan, called “Rewiring for Growth.” Walgreen said the plan is on track for $1 billion in annual savings beginning in 2011. It hopes to save $500 million in fiscal 2010. As part of that plan, Walgreen said in January it would eliminate 1,000 jobs, mostly in management.
Walgreen says cost-cutting and sales initiatives cost it 6 cents per share, but resulted in savings of 6 cents per share. Pharmacy sales improved, but sales of nonpharmacy items were hit by the recession.
Walgreen said its same-store sales, or revenue from locations open at least one year, rose 2.8 percent. That includes growth of 3.8 percent in the pharmacies, where Walgreen makes about two-thirds of its sales, and a decrease of 0.9 percent at the front end of the stores. (AP)
