Walgreen’s earnings unexpectedly drop
chicago -- Shares of drugstore chain Walgreen Co. tumbled Monday after the usually solid retailer’s fiscal fourth-quarter revenue fell sharply short of expectations, causing its first earnings decrease in nearly a decade.
Shares sank more than 15%, on pace to be the largest single-day decrease in roughly 20 years, before recovering slightly.
Walgreen, one of the nation’s biggest drugstore chains, blamed its poor performance on higher expenses and lower reimbursements for popular generic medications.
Meanwhile, executives warned that its problems would likely persist.
“Many of the challenges we faced in this quarter will continue, including comparisons to last year’s blockbuster generics,” said Rick Hans, the company’s director of finance.
Overall, the Deerfield, Ill.-based company said its profit slipped nearly 4%, falling to $396.5 million, or 40 cents a share, from $412.3 million, or 41 cents, a year ago.
Quarterly revenue for the three months ended Aug. 31 rose more than 10% to $13.4 billion. That was still far short of Wall Street forecasts.
Analysts surveyed by Thomson Financial expected earnings of 47 cents a share and revenue of $13.5 billion.
“Walgreen is typically a pretty dependable company,” Morningstar analyst Mitch Corwin said. “So it comes as a surprise when not only they disappoint, but when they disappoint like this.”
Goldman Sachs downgraded the company’s stock, predicting at least two or three more quarters of underwhelming results.
Meanwhile, Bear Stearns analyst Robert Summers said the performance didn’t bode well for the drugstore industry.
“While it is easy to downplay this miss as one bad quarter for a normally very predictable company, we believe the industry as a whole is heading into a very difficult period as the generic margin benefit begins to roll off dramatically,” he wrote in a research note. “This is not quarter specific and is not company specific.”
Shares of Walgreen competitors CVS Caremark Corp. and Rite Aid Corp. also slumped Monday.
Walgreen shares fell $7.08, or 15%, to close at $40.16.
