Walgreen shares surge on solid Q1 EPS, same-store sales

Posted Dec 21st 2007 1:11PM by Joseph Lazzaro
Filed under: Earnings Reports, Walgreen Co (WAG)

Walgreen Friday posted first quarter EPS of 46 cents, 2 cents above the Reuters consensus estimate, on solid sales and effective cost controls, the company announced Friday. Walgreen (NYSE: WAG) shares surged on the news, gaining $2.69 to $38.94 in mid-day Friday trading.

Meanwhile, Q1 same-store sales increased 5.4%, Walgreen said, including a 4.6% "front store" revenue gain and a 5.9% "back store" gain, which includes pharmacy revenue.

Revenue in Q1 increased by 10.4% to $14.03 billion versus the Reuters consensus estimate of $14.10 billion.

"We brought stronger expense discipline into play across the company, while making investments that will build and enhance our competitive position," Walgreen CEO Jeffrey A. Rein said in the press release. "Our store managers and corporate folks did an excellent job of controlling expenses this quarter. We also improved advertising efficiencies while maintaining our weekly sales promotions at a comparable level."

Walgreen said it opened 169 stores in Q1, and plans to open 550 in 2008. As of November 2007, the company operated 6,139 stores and said it will exceed its operating goal of 7,000 stores in 2010. The company added that it sees a long-term potential for about 13,000 stores in the United States.

Stock Analysis: In all, Q1 was a good quarter for WAG, particularly regarding same-store sales performance -- one of Wall Street's favorite metrics. Some analysts had expected softer same-store sales, but 5.4% is hardly soft.

However, for now, WAG remains in the Don't Buy category for all but high-risk investors. Following a string of quarterly disappointments prior to Q1, Walgreen must first demonstrate that it can continue to grow same-store sales at a healthy pace in the quarters ahead, before getting a Buy signal from me. High-risk investors may wish to establish a WAG position if the stock's price closes above $40 for 3 consecutive days, but keep in mind that WAG will incur considerable resistance in the $42-46 range.

Tags: consumer stocks, defensive stocks, earnings, inthenews, pharmacies, same store sales, WAG, Walgreen

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Reader Comments (Page 1 of 1)

12-24-2007 @ 4:51PM

JACK said...

WALGREENS MAY BE CUSTOMER-ORIENTED, BUT THEY ARE NOT EMPLOYEE-ORIENTED. I WAS LET GO (A PHARMACIST) WITHOUT A HEARING ON A CHARGE OF BEING A RACIST, WHICH I AM DEFINITELY NOT. THEY DO NOT ANSWER MY EMAILS AND ARE ALOOF AND SELF-SERVING.