NEW YORK ? Drugstore operator Walgreen Co.'s fiscal first-quarter earnings fell more than 4 percent due in part to a slow flu season and its decision to leave the Express Scripts Inc. pharmacy network next month.
Walgreen said it would consider a reasonable offer from Express Scripts but reported no progress in negotiations. A three-year contract between the companies ends Dec. 31, and since June, Walgreen and Express Scripts have said they were preparing to stop doing business, jeopardizing billions of dollars in sales for Walgreen.
Shares of Walgreen fell $2.05, or 6.1 percent, to $31.45 in premarket trading.
The nation's largest drugstore chain said the decision to stop doing business with Express Scripts cost a penny per share in sales at pharmacies open at least a year and a penny per share in expenses during the quarter.
The drugstore chain also said a delay in the cough, cold and flu season hurt earnings by another penny per share. The company administered 5 million flu shots through Nov. 30 compared with 5.6 million a year ago.
Walgreen said Wednesday net income fell to $554 million, or 63 cents per share, from $580 million, or 62 cents per share, a year ago, when it had more shares outstanding. Revenue grew 4.7 percent to $18.16 billion.
Analysts surveyed by FactSet expected, on average, earnings of 67 cents per share and $18.24 billion in revenue.
The Deerfield, Ill., company gets $5.3 billion in annual revenue from Express Scripts, which pays Walgreen and other drugstores to fill prescriptions. But it said it would rather give up that revenue than continue filling unprofitable prescriptions.
"While we remain open to any fair and competitive offer from Express Scripts, we firmly believe that accepting their proposal was not in the best long-term interests of our shareholders," Walgreen CEO Greg Wasson said in a statement.
Walgreen is trying to keep as many of those prescriptions as possible by making its own arrangements with companies and health plans. The company says it expects to keep 97 to 99 percent of its fiscal 2011 prescription volume in the new fiscal year, but analysts say Walgreen will lose most of the Express Scripts prescriptions.
Express Scripts also is trying to buy Medco Health Solutions Inc., another large pharmacy benefits manager. If that deal goes through, Walgreen may lose Medco's clients over time.
Walgreen's selling, general and administrative expenses also climbed 5 percent to $4.2 billion because of its acquisition of drugstore.com and other items.
Earlier this month, Walgreen said sales at stores open at least a year grew 2.5 percent during the quarter. However the Express Scripts fight reduced those sales by 1.1 percent. Sales at stores open at least a year are considered a key measurement of retailer health because they exclude results from stores that have opened or closed in the last year.
The company operates 7,812 drugstores nationwide.
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