Despite a 13.7 percent increase in net earnings for its second quarter, The Walgreen Co. (Deerfield, Ill.) missed analysts’ estimates because of the costs of converting photo-processing labs to a digital format.
The nation’s largest drugstore chain reported a 12.3 percent increase in sales for the quarter ended Feb. 28, 2005. Same-store sales jumped 7.7 percent in the quarter.
For the first six months of the year, earnings are up 20 percent and sales are up 12.8 percent.
“Our results benefited from continued solid execution at our stores, especially during the important holiday selling season,” said chairman and ceo Dave Bernauer. “Although the cold and flu season peaked later this year than the previous year, the overall effect on the quarter was fairly comparable.”
However, said president Jeff Rein, “we continued to incur significant costs with our conversion to digital labs, [though] this investment is resulting in improved customer satisfaction and better net operating profit. Our convenient, neighborhood stores and long hours — more than 1400 stores and photo labs are open 24 hours — make digital labs a particularly worthwhile investment for a retailer like Walgreens.”
The company opened 178 new stores in the first half of fiscal 2005, compared to 140 in the comparable period a year ago, with a net gain this year of 156 stores after relocations and closings. “We’re on track to open 450 new stores this year, with a net increase of 365,” said Rein.
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