FINANCE

Walgreens takes big stake in leading Chinese pharmacy

BY Michael Johnsen

Walgreens Boots Alliance is expanding its global retail pharmacy operations.

Walgreens on Wednesday announced it was acquiring a 40% stake in Sinopharm Holding GuoDa Drugstores in a deal worth approximately $416 million.

“We are very pleased to become a strategic investor in GuoDa,” stated Stefano Pessina, executive vice chairman and CEO, Walgreens Boots Alliance. “It is China’s leading pharmacy chain and we believe that we can positively contribute to its continued successful development with our global pharmacy expertise. We have had a presence in China for around 10 years, initially through Alliance Boots, and we are excited about the opportunity to further invest in the country’s fast growing retail pharmacy sector.”

GuoDa is a leading retail pharmacy chain in China, and has been pursuing its vision for expansion across the country in the context of the ongoing healthcare reforms and increasing importance of the pharmacy channel in the country. It has 3,500 retail pharmacies across 70 cities in China, according to Business Insider.

Walgreens Boots Alliance, as a global pharmacy-led enterprise, believes it is well positioned to provide its significant expertise to GuoDa and support its growth ambitions.

The transaction is subject to regulatory review and approval, and other customary closing conditions. Upon completion, Walgreens Boots Alliance would account for this stake as an equity method investment.

 

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FINANCE

Lululemon strong in Q3; upbeat about holiday

BY Marianne Wilson

Some other players in the sports and athleisure market may be having a rough time of it these days, but Lululemon Athletica Inc. is not one of them.

The maker of yoga wear and other specialty apparel raised its forecast for the year after easily topping analysts’ estimates for the third quarter, fueled by strong digital growth. Lululemon’s net revenue increased 14% to $619.0 million in the quarter ended Oct. 29.

Total same-store sales increased 8%, Comp sales surged 26% in the direct channel and 2% in stores.

The company reported net income of $59 million and earnings per share of $0.43 for the quarter, down from $68 million a year earlier. Excluding the impact of the Ivivva restructuring (the company announced in June it was closing most of its Ivivva kids stores), adjusted earnings per share would have come in at $0.56. Analysts had expected adjusted earnings of 52 cents a share on sales of $610 million, with a comp rise of 5.3%.

Kevin Wathey, a consultant at GlobalData Retail, commented that the strength of Lululemon’s bottom line is mostly due to its ability to resist the temptation of excessive discounting — even in a market that has become steadily more promotional.

“In our view, this is made possible by the fact that Lululemon, unlike so many of its rivals, has a line-up of products that people want and for which they are prepared to pay full price,” he said. “Constant innovation and a laser-like focus on functionality and quality are central to this. Complementing the product proposition are Lululemon’s efforts to foster loyalty. The company has long understood the power of creating a sense of community, and we are encouraged to see it extending its efforts in this area.”

Lululemon said that its holiday season was off to a great start, with the company experiencing its highest traffic and largest sales ever on Black Friday and on Cyber Monday. It raised its forecasts for its profit and revenue for its fiscal year. It now expects adjusted earnings of $2.45 to $2.48 a share, up from a prior forecast of $2.35 to $2.42 a share. Revenue is expected in a range between $2.59 billion and $2.61 billion, up from $2.55 billion to $2.56 billion.

The strength of our Q3 earnings supports our unique position as the global brand defining an active, mindful lifestyle,” said Laurent Potdevin, Lululemon CEO. “I’m grateful for the enthusiasm I see every day across our collective as we remain on our path to delivering $4 billion in revenue in 2020.”

Lululemon also announced that its board of directors has approved a new stock repurchase program for up to $200 million.

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FINANCE

Dollar General to open 900 stores, accelerate remodels in 2018

BY Marianne Wilson

Dollar General on Thursday reported results for the third quarter that beat Street estimates and announced aggressive remodeling plans and new store growth for the coming year.

The discounter will execute approximately 2,000 real estate projects in fiscal 2018. The emphasis will be on remodeling. Dollar General plans to open 900 new stores (compared to an estimated 1,285 new units in fiscal 2017), remodel 1,000 existing sites and relocate 100 stores (compared to 760 combined remodels and relocations this year).

“We continue to believe that investing in the business through our high-return new store growth is the best use of our capital to help drive long-term shareholder value,” said Todd Vasos, Dollar General’s CEO. “Our new store growth is complemented with a significant increase in our store remodel program from fiscal 2017 that we view as an investment to enhance and consistently deliver on our brand promise to help our customers save time and money every day.”

Neil Saunders, managing director of GlobalData Retail, commented that many of Dollar General’s new stores will be located in metro areas.

“This represents a slight shift in focus–but one that we believe presents Dollar General with a significant opportunity,” Saunders said. (For more, click here.)

Dollar General’s net income rose to $252.5 million, or 93 cents per share, from $235.3 million, or 84 cents per share, in the quarter ended November 3, over the year-ago period. Excluding items, the company earned 98 cents per share, beating the average analysts’ estimate of 94 cents.

Net sales increased 11% to $5.90 billion. Same-store sales rose 4.3%, which the company attributed to increases in average transaction amount and customer traffic. The company said hurricane-related sales contributed an estimated 30 to 35 basis points to same-store sales.

“During the quarter, we effectively balanced our same-store sales growth while achieving gross profit rate expansion and continuing our planned investments in the business,” said Vasos.

Dollar General narrowed its fiscal 2017 GAAP diluted earnings per share to $4.37 to $4.47, compared to its prior guidance range of $4.35 to $4.50. The current diluted earnings per share guidance range now includes the estimated net negative impact on the third quarter diluted earnings per share results of $0.05 related to the hurricanes.

For fiscal 2017, the company now forecasts net sales growth of approximately 7%, compared to its prior guidance range of 5% to 7% growth. It also forecasts same-store sales growth of approximately 2.5%, compared to its prior expectation that same-store sales would fall at the upper end of the range of slightly positive to up 2%.

Dollar General operated 14,321 stores in 44 states as of November 3, 2017.

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