Walgreen Co.'s fourth quarter net income tumbled 55 percent compared with last year when a big gain inflated results for the nation's largest drugstore chain.
A business split that drove away customers and a multi-billion dollar overseas expansion also combined to put a sizeable dent in the Deerfield, Ill., company's earnings, which still managed to top analysts' expectations.
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Walgreen said Friday its performance took a hit because of its deal to spend $4 billion in cash and more than 83 million shares for a 45 percent ownership stake in Alliance Boots, a Swiss company that runs the largest drugstore chain in the United Kingdom. Walgreens has said the deal will make it the world's single largest purchaser of prescription drugs.
Results also were hurt because of the company's decision to part ways after a contract dispute with Express Scripts Holding Co., which runs prescription drug plans for employers, insurers and other clients as the nation's largest pharmacy benefits manager. The companies have since made up, but their new contract didn't start until Sept. 15, or after the fiscal fourth quarter ended.
The nine-month split sent Walgreen customers to its competitors to get their prescriptions filled.
Walgreen said the Alliance Boots deal and the split with St. Louis-based Express Scripts cost it about 9 cents a share and 6 cents a share, respectively, during the fourth quarter. An inventory charge of 10 cents per share also affected results.
Last year, the drugstore operator recorded a $434 million gain from the sale of its pharmacy benefits business, which boosted its performance in the 2011 quarter.
Walgreen, which runs nearly 8,000 drugstores nationwide, said Friday it earned $353 million, or 39 per share, in this year's quarter. That compares to $792 million, or 87 cents per share, a year ago.
Excluding one-time factors, adjusted earnings were 63 cents per share. That beats the 55 cents per share analysts polled by FactSet on average were expecting. Walgreen said earlier this month that revenue fell 5 percent to $17.1 billion in the quarter. Analysts had expected about $17.2 billion.
For the full fiscal year, Walgreen earned $2.13 billion, or $2.42 per share, on $71.63 billion in revenue..
"This was certainly a challenging year, capped off by a tough fourth quarter, but a very important and strategic year," CEO Greg Wasson told analysts in a Friday morning conference call.
Going forward, Walgreen is trying to get back some of the business it lost due to the Express Scripts split.
The company is offering a $25 gift card for customers who transfer their prescriptions back to Walgreens. Company executives told analysts Friday they were encouraged by early returns, but they declined to offer specifics on how many customers they expected to return.
Walgreen shares fell 37 cents to $36.23 in Friday afternoon trading after climbing more than 17 percent during the fiscal fourth quarter. Meanwhile, broader trading indexes dropped slightly on Friday.