Longs’ Quarterly Profit Jumps 32%

Longs Drug Stores Corp., a drugstore chain in the Western United States and Hawaii, said Wednesday that fiscal fourth-quarter earnings increased 32%, and announced plans to change the way it accounts for certain leases, possibly restating results.

Net income rose to $17.7 million, or 47 cents a share, in the quarter ended Jan. 27, compared with $13.4 million, or 36 cents, a year earlier. Sales of $1.2 billion were 2% lower than the $1.23 billion posted a year earlier.

Analysts surveyed by Thomson First Call had expected earnings of 37 cents a share in the latest quarter.

Sales at stores open at least one year, or same-store sales, declined 2.8% during the quarter, with pharmacy sales up 1% and sales in other areas 5.7% lower. The company said the year-earlier results were boosted by the Southern and Central California grocery strike and lockout.

Pharmacy sales were 45.7% of total sales during the period, up from 43.9% a year earlier.

For fiscal 2005, the year that just ended, Longs said net income jumped 23% to $36.6 million, or 97 cents a share, from $29.8 million, or 79 cents, a year earlier. Sales rose 1.8% to $4.61 billion.

Longs said it planned to open or relocate five to 10 stores this year. It expects to more than triple new store openings in fiscal 2007 and double self-distribution of its non-pharmacy merchandise by fiscal 2008.

In light of a recent clarification from the Securities and Exchange Commission and consultation with its auditor, Deloitte & Touche, Longs said it would change the way it accounted for its leases, including the accounting for “rent holidays,” or periods in a lease when a company pays reduced or no rent.

Longs said those adjustments would reduce pretax income for fiscal 2005 and previous years by as much as $15 million, most of which relates to periods before fiscal 2003.

Looking ahead, Longs said total sales and same-store sales would both be flat to 2% lower in its fiscal first quarter. Easter will occur two weeks earlier this year, and although the shift won’t affect quarterly results, it will move sales from April to March.

Longs is forecasting first-quarter earnings of 27 cents to 32 cents a share, compared with 25 cents a year earlier, excluding any lease accounting effects.

For the full year ending Jan. 26, 2006, Longs Drug estimates that total sales will increase 1% to 3% and same-store sales will be flat to 2% higher. Longs shares fell 27 cents to $26.95 on the New York Stock Exchange.