Advertisement
 

Longs Cuts Estimate Amid Competition

California

October 10, 2001|From Bloomberg News

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."

Same-store sales will rise about 3%, less than an earlier estimate of 4%. Sales at stores open at least a year rose 3% last month from a year earlier, as pharmacy sales gained 10.3% and merchandise sales fell 2.3%.

Shares of Walnut Creek, Calif.-based Longs fell 20 cents Tuesday to close at $23.68 on the New York Stock Exchange. They had risen 24% in the last year. The company operates 428 stores in California, Hawaii, Washington, Nevada, Colorado and Oregon.

Drugstore chains, including No. 1 Walgreen, have said shoppers are reducing purchases of nonessential goods such as makeup. Although pharmacy sales rose at Longs, customers bought fewer higher-profit items offered in the front of its stores in August and early September, the company said.

Advertisement
Los Angeles Times Articles
|
|
|