March 25 - Walgreen's profit slipped as fewer generic drugs were available for sale. The chain will close stores to boost profitability. Fred Katayama reports.
The availability of fewer new generic drugs for sale dented Walgreen's profit in the latest quarter. Generic drugs offer fat profit margins than branded drugs, but less of those are available because fewer blockbuster drugs are coming off patent. Adding to the sting: a rather mild flu season bit into profit growth of its pharmacy business, which makes up the bulk of Walgreen's sales. So net profit slipped despite a solid gain in sales. To improve profitability, the U.S.' largest drug store chain says it will close 76 stores in the second half of the year. That will result in charges north of $240 million. Walgreen's stock, whose 39 percent gain over the last 12 months has vastly outperformed the broader market, shot higher at the open. Looking ahead, the company sees the pressure from fewer new generics easing in the second half. And it raised its estimate for revenue and cost savings it will gain from its partnership with Europe's biggest drug store chain, Alliance Boots. ISI analyst Ross Muken said: "Walgreens saw its second quarter EPS come in slightly below expectations, but the new store optimization plan and strong execution from Alliance Boots should more than offset these results."