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Walgreen Co. Achieves Record Sales and Earnings -- Again

DEERFIELD, Ill. - Leading drugstore chain Walgreen Co. said yesterday it achieved record sales and earnings for the fourth quarter and fiscal year 2004, ending Aug. 31. In addition, Walgreens announced its 30th consecutive year of record sales and profits. The retailer said it is one of only two companies among the Fortune 500 to achieve such continuous success.

The Deerfield, Ill.-based chain, which operates 4,582 drugstores in 44 states and Puerto Rico, said net earnings for the fourth quarter were up 18.1 percent to $327.2 million or 32 cents per share (diluted) versus last year's $277.1 million or 27 cents per share. Fiscal year net earnings increased 15.7 percent to $1.360 billion or $1.32 per share (diluted) versus last year's $1.176 billion or $1.14 per share.

Sales rose 14.3 percent to $9.4 billion for the fourth quarter and 15.4 percent to $37.5 billion for the year. Total sales in comparable stores were up 9.7 percent for the quarter and 10.9 percent for the year.

Walgreens said prescriptions accounted for 63 percent of its sales in fiscal 2004, with prescription sales in comparable stores increasing 12.5 percent in the quarter and 14.0 percent for the year. Overall, Walgreens filled 443 million prescriptions in 2004, an increase of 10.8 percent from the previous year and more than any other pharmacy retailer.

Walgreens has succeeded in giving supermarkets a run for their money via its major market penetration, combined with its weekly sales specials, as opposed to everyday low pricing, according to Bernard Sands v.p. - retail sector analyst Richard D. Hastings.

"Walgreens gets tough on categories such as paper goods, candy, cleaning goods, soda, and snacks. Their weekly circulars are very competitive," he told Progressive Grocer, adding: "They have a system, it works, and they stick to it. Vendors are especially happy to work with them, and they're well perceived by consumer goods vendors in many categories."

In the 52-week period ending Aug. 7, Walgreens gained market share against all food, drug, and mass merchandise competitors in 59 of its top 60 product categories as measured by ACNielsen, according to Walgreens. This represents more than 60 percent of Walgreens' self-service sales. The gains outpaced aggressive store expansion, reflecting growth in existing stores, the company noted.

Looking ahead, Walgreens is budgeting approximately $1.5 billion in capital investments for fiscal 2005. This reflects expenditures for new stores (including more planned real estate purchases), technology, and a new distribution center in South Carolina scheduled to open in 2007.

"We believe the South Carolina distribution facility will increase Walgreens' market share gains in the Southeast, putting pressure on Brooks/Eckerd to spend enough on the region's Eckerd stores to remain competitive beyond 2007," Bernard Sands' Hastings noted.

-- Jenny McTaggart
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