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Walgreens tops 4Q expectations, helped by Rite Aid deal

October 11, 2018

FILE- This June 25, 2018, file photo shows a Walgreens in Peoria, Ariz. Walgreens Boots Alliance, Inc. reports earnings Thursday, Oct. 11. (AP Photo/Ross D. Franklin, File)

DEERFIELD, Ill. (AP) — Walgreens beat fourth-quarter earnings expectations with an assist from some recently acquired Rite Aid stores, and the nation’s largest drugstore chain started fiscal 2019 with a largely better-than-expected outlook.

But sales from established U.S. stores grew only slightly.

Walgreens said Thursday that it expects fiscal 2019 earnings to range from $6.40 to $6.70 per share.

Analysts forecast, on average, earnings of $6.43 per share, according to FactSet.

In the fiscal fourth quarter, Walgreens Boots Alliance Inc. net income jumped 88 percent to $1.51 billion compared to last year’s quarter, when costs tied to a previous Rite Aid deal attempt weighed on results. Earnings, adjusted for one-time gains and costs, came to $1.48 per share in the most recent quarter, while revenue climbed 11 percent to $33.44 billion.

Analysts expected, on average, earnings of $1.44 per share on $33.64 billion in revenue, according to Zacks Investment Research.

Overall sales from stores opened at least a year increased less than 1 percent in the quarter but sales in the front end, or the area outside the pharmacy, fell again.

“This underscores that Walgreens is still falling a long way short of creating a compelling retail offer,” GlobalData Retail Managing Director Neil Saunders said in a research note.

Drugstore chains are facing growing competition in areas outside their pharmacies from online options like Amazon.com.

Saunders said he was “moderately encouraged” by changes Walgreens is making to that business. He noted that a partnership with grocer The Kroger Co. should help.

Walgreens’ U.S. pharmacy sales also grew nearly 17 percent in the fourth quarter.

Deerfield, Illinois-based Walgreens has added nearly 2,000 stores from rival Rite Aid after a previous deal to buy all of Rite Aid fell through.

The price of Walgreens stock added 33 cents to $72.64 in morning trading, rebounding from a decline in premarket trading.

Shares of Walgreens, which replaced General Electric in the Dow Jones industrial average earlier this year, have dropped slightly since the start of 2018.

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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on WBA at https://www.zacks.com/ap/WBA

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