Walgreen Co. shrugged off other retailers’ concerns about an economic slowdown, announcing aggressive store expansion plans Tuesday and posting record fiscal first-quarter revenue and profit.
The Deerfield-based drugstore giant said its healthy showing was aided by a strong performance in its drug prescription business, which rose 21 percent. Walgreens also said it would push ahead with its fast-paced store-opening schedule despite a falloff in U.S. consumer spending.
“Growth is a huge challenge, but it’s the right thing to do,” said Daniel Jorndt, Walgreens’ chief executive. “And this is absolutely the right time in our history to do it.”
Walgreens’ investors appeared less convinced about the strategy. They bid down Walgreens’ stock $1 a share, or 2.4 percent, to close at $40.81. Earlier in the day, the stock was off 4 percent even though its results met analysts’ expectations of 15 cents per diluted share.
Walgreens opened a record 126 new stores in the three months ending Nov. 20. Such expansion is a drag on earnings, Jorndt said, because new stores generally lose money for their first year or two of operation.
Nevertheless, Walgreens reported net income of $158 million, or 15 cents per diluted share,up 24 percent from $128 million, or 13 cents per diluted share, in the year-earlier period.
Revenue increased 16.4 percent, to $5.61 billion from $4.82 billion last year. Sales at stores open at least a year rose 10.8 percent.
Prescriptions accounted for 58 percent of sales in the first quarter. Almost 90 percent of those were handled by third-party insurance plans.
There is no sign that its business fell off during the month of December, which dealt holiday sales disappointments to many U.S. retailers. Walgreens gained market share against food, drug and mass merchants in every one of its top 50 product categories in the most recent four-week period.
“The drugstore business is about basics,” Jorndt said. “This is our bread and butter.”
Walgreens said it will celebrate its 100th year in business in 2001 with its most aggressive expansion plan. “We’ll open approximately 500 stores–a new one every 17 hours–in fiscal 2001,” said Walgreens President David Bernauer. “We plan to stay at that level for the foreseeable future.”
Walgreens is on target to meet its goal of having 6,000 stores by 2010, Bernauer said. The chain has 3,259 drugstores in 43 states and Puerto Rico.
