Longs Drug Stores Corp., a chain in the western U.S., said its fiscal third-quarter earnings will miss company and analysts' forecasts by more than a third as it loses sales to competitors.
The company cut its estimated profit for the quarter ending Oct. 25 to 11 cents to 13 cents a share, from 18 cents to 20 cents, it said in a prepared statement. The average estimate of analysts polled by Thomson Financial/First Call was 19 cents, which is what Longs earned in the year-earlier period. It cut its sales forecast to 4%, from 4.5% to 5%.
Sales were hurt by competition from larger rivals Walgreen Co., Rite Aid Corp. and Wal-Mart Stores Inc., which has pharmacies in its stores, analysts and investors said. Even as shoppers reduced purchases because of fears of a possible recession, Longs' profit growth slowed as it struggled to integrate acquisitions and took too long to close unprofitable stores, investors said.
"Losing 1% of sales should not cost you 35% of earnings," said Franklin Morton, research director for Ariel Capital Management, the company's biggest shareholder with 3.9 million shares. "They are losing a competitive battle they've been fighting for a while."