Drugstore operator Walgreens Boots Alliance Inc (NASDAQ:WBA) on Thursday reported a higher-than-expected quarterly profit and said it would widen its cost-cutting program, sending its shares higher.
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The company, formed by the December acquisition of Europe's Alliance Boots by Walgreen Co, said it would reorganize corporate and field operations, streamline information technology functions and close 200 U.S. stores while opening 200 others.
"This really is just getting the right stores in the right place," Executive Vice President Alex Gourlay said on a conference call.
In August, Walgreen Co announced a $1 billion cost-cutting program over three years. Walgreens said on Thursday that it had identified ways to increase the program to a projected $1.5 billion by the August year-end of fiscal 2017.
The company said it would take pretax restructuring charges of $1.6 billion to $1.8 billion over time.
Shares of the largest U.S. drugstore chain operator, which is reporting its first results since the merger, were up 2.8 percent at $90.17.
Walgreens said combined net savings for the first half of fiscal 2015 were $310 million and that it was on track to reach at least $650 million for the full year and $1.0 billion in fiscal 2016.
The company reported a 35.5 percent rise in net sales to $26.6 billion for the second quarter ended Feb. 28, mainly due to the addition of Boots.
Analysts on average had expected sales of $27.77 billion, according to Thomson Reuters I/B/E/S.
Sales at U.S. Walgreens and Duane Reade stores open at least a year rose 6.9 percent, benefiting from a strong cough, cold and flu season and continued growth in Medicare Part D prescriptions.
The U.S. drugstore business generated about 79 percent, or $21 billion, of total sales. Pharmacy sales accounted for 64.4 percent of U.S. sales.
Comparable-store sales in the international retail pharmacy division rose 2.9 percent in January and February.
Net income attributable to Walgreens Boots was $2.04 billion, or $1.93 per share. Walgreen alone earned $716 million, or 74 cents per share, in the year-earlier period.
Excluding special items, Walgreens Boots earned $1.18 per share, beating the analysts' average estimate of 95 cents.
The company forecast full-year earnings of $3.45 to $3.65 per share, excluding items. Analysts were expecting $3.61.
(Reporting by Nandita Bose in Chicago and Shailaja Sharma in Bengaluru; Editing by Ted Kerr and Maju Samuel)