By Jessica Wohl
CHICAGO (Reuters) - Walgreen Co
The drugstore operator has suffered as cost-conscious consumers buy only items on sale, shop closer to their paydays and use their credit cards less often.
Walgreen is redesigning stores and adding more groceries to appeal to busy shoppers. It is also expanding into new healthcare areas, such as clinics and offering injectable medications.
Profit fell to $408 million, or 41 cents per share, in the first quarter ended November 30, from $456 million, or 46 cents per share, a year earlier.
Analysts on average were expecting earnings of 46 cents per share, according to Reuters Estimates.
Sales rose 6.6 percent to $14.9 billion. Sales at stores open at least a year increased just 1.7 percent after rising 5.4 percent a year earlier.
Walgreen first scaled back its store opening plans in July. In October, it lost out to rival CVS Caremark Corp
On Monday, Walgreen said it would reduce its store openings to a rate of 4 percent to 4.5 percent in 2010 and 2.5 percent to 3 percent in 2011. In July it set plans to slow store openings to 5 percent by 2011.
Slowing store openings should save $500 million beyond the $500 million capital expenditure reductions announced in July, Walgreen said.
The company's shares fell $1.11, or 4.3 percent, to $24.97. The stock has fared better than those of other drugstore chains this year. Through Friday, Walgreen was down 31.5 percent, while CVS had fallen 32.2 percent and Rite Aid had plummeted 87.5 percent.
CUTTING PRICES
A slower expansion rate should give Walgreen the flexibility to spruce up existing stores and invest in areas such as buying prescription files and opening more Take Care clinics at stores and offices, said President Gregory Wasson.
In the past, drugstores could typically charge more for groceries and other goods because customers shopped there for convenience, not for value.
Now that consumers have curbed spending, Walgreen has cut prices on basic items to keep shoppers from switching to other retailers, such as Wal-Mart Stores Inc
Walgreen has also seen more cost-conscious shoppers, particularly those with little or no insurance, sign up for a low-cost drug plan it introduced in late 2007.
It said 30 percent of all enrollees were new to its stores, echoing comments from smaller rival Rite Aid Corp
During a conference call, Wasson said he expected the board to make an announcement about its CEO search in early 2009.
Walgreen has traditionally promoted people to the CEO spot from within, but this time it is also looking at external candidates. The company recently brought in a few executives from the outside, including a new chief financial officer and its first chief marketing officer.
Wasson said on Monday that Walgreen had hired three new vice presidents from outside. One of them, responsible for developing new store formats, had worked on Tesco's
(Additional reporting by Martinne Geller in New York; Editing by Lisa Von Ahn)
