Walgreen Profit Climbs 24% for Quarter

Walgreen Co., the largest U.S. drugstore chain, on Tuesday said fiscal first-quarter earnings rose 24%, boosted by prescription-drug sales, new stores and lower costs.

Net income rose to $158.4 million, or 15 cents a share, from $127.8 million, or 13 cents, in the year-earlier quarter, said company spokesman Michael Polzin. Sales for the quarter ended Nov. 30 rose 16% to $5.61 billion from $4.82 billion.

Walgreen, which has 3,259 stores, is building new ones to gain sales in states including California, Texas, Georgia, Florida and Arizona. Walgreen opened 126 stores in the quarter. Chief Executive Daniel Jorndt plans to open 500 stores this fiscal year and maintain that pace to reach 6,000 stores by 2010. New stores generally aren’t profitable for two or three years.

The Deerfield, Ill.-based company met the 15-cent average estimate of analysts surveyed by First Call/Thomson Financial.

The company’s shares fell $1 to close at $40.81 on the New York Stock Exchange. They have risen 40% in the last year.

Some investors may have expected a company with a high price-to-earnings ratio like Walgreen to beat expectations, said Raymond James analyst John Ransom. Walgreen trades at 46 times estimated earnings, while No. 2 drugstore chain CVS Corp. trades at 32 times estimated earnings.

In addition, Goldman, Sachs & Co. said in a report Tuesday that food and drug retail stocks could experience a sell-off in the first quarter because recent gains don’t reflect fundamental changes in the industry.

Sales at Walgreen stores open at least a year rose 11% from a year earlier. Same-store sales are a key indicator of a company’s business because they exclude new and closed stores.

Profit was helped by a 21% increase in prescription sales, which made up 57.5% of total sales in the quarter.