Walgreens (Nasdaq:WAG) and Rite Aid (NYSE: RAD), two of the nation's largest drugstore chains, both reported strong quarterly earnings on rising prescription sales and a new wave of generic drugs.
Walgreens said its fiscal first-quarter earnings soared 68 percent, partly due to investments that the chain has made in other companies. Walgreens reported net earnings of $695 million, or 72 cents per share, compared to $413 million, or 43 cents per share, in the year-ago period.
Walgreen's net sales for the quarter came in at $18.33 billion, up 6 percent from last year's Q1 net sales of $17.32 billion. The revenue came in above Wall Street's estimate of $17.98 billion. The company reported operating income of $924 million, an increase from last year's Q1 operating income of $705 million.
Much of Walgreens' success in the quarter comes from the retailer's stakes in other companies. In 2012, Walgreens acquired a 45 percent stake in Alliance Boots, which operates the largest drugstore chain in the U.K. Earlier this year, Walgreens also purchased an ownership stake in AmerisourceBergen, which it partnered with as a supplier for its drugstores, mail order and specialty pharmacy businesses.
Other strong points for Walgreens were prescription sales, which jumped 7.2 percent in the quarter, while sales from the front end, or the store areas outside its pharmacy, climbed 2.4 percent.
Walgreens' smaller competitor, Rite Aid, also reported a strong quarter, posting its third-straight quarterly profit and higher gross margins. Rite Aid reported a profit of $89.7 million, or 9 cents per share, compared with a year-earlier loss of $28.1 million, or 3 cents a share.
Rite Aid's revenue rose 2 percent to $6.36 billion, while same-store sales climbed a healthy 2.3 percent.
For the fiscal year, Rite Aid lowered its earnings forecast to $0.17 to $0.23 per share, on revenue of $25.3 billion to $25.425 billion. The company had earlier expected earnings of $0.18 to $0.27 per share, on revenue of $25.1 billion to $25.3 billion.
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