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Cardinal Health braces for August contract expiration with Walgreens

BY Michael Johnsen

DUBLIN, Ohio — In the wake of a new partnership announcement between Walgreens and AmerisourceBergen, Cardinal Health announced on Tuesday that its pharmaceutical distribution contract with Walgreens that is scheduled to expire at the end of August 2013 will not be renewed.

"Although we are not yet ready to provide fiscal 2014 earnings guidance, our portfolio has considerable balance and we have prepared strategies to mitigate the impact of a Walgreens nonrenewal," stated George Barrett, Cardinal chairman and CEO. "Based on this, we will target a 2014 non-GAAP diluted earnings per share from continuing operations to be at least similar to the fiscal year 2013 guidance range of $3.42 to $3.50 we provided in our fiscal 2013 second quarter earnings release. We intend to provide more color on fiscal 2014 during our fiscal 2013 third and fourth quarter earnings calls."

The company also noted that earnings for the current fiscal year 2013 would not be negatively impacted as the current Walgreens agreement remains in place throughout fiscal 2013.

Sales to Walgreens, one of Cardinal Health’s two largest customers, generated approximately 21% of consolidated revenue for fiscal 2012.  For this period, approximately 60% of revenue from Walgreens was classified as bulk sales, which, as described in the Form 10-K for the fiscal year ended June 30, 2012, has significantly lower segment profit as a percentage of revenue than non-bulk sales. 

After the expiration of its contract with Walgreens, Cardinal anticipates a significant net working capital decrease based on reduced inventory and accounts receivable, partially offset by reduced accounts payable. Based on the expected working capital decrease and other factors, it is anticipated that the expiration of the Walgreens contract will result in a meaningful net, after-tax benefit to cash flow from operating activities in fiscal 2014.

 

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RadioShack continues to build retail team, naming Michael De Fazio SVP store concepts

BY Michael Johnsen

FORT WORTH, Texas — In a SEC filing, RadioShack last week confirmed it had recruited Michael De Fazio, one of the architects behind Duane Reade’s new store formats, to help the small-box specialty retailer recapture some of its lost retail pizzazz. 

As SVP store concepts, De Fazio joins a team that includes Troy Risch, who came to RadioShack from Target as EVP operations in December, and Huey Long, formerly of Wal-Mart and now RadioShack EVP strategy and consumer insights who also signed with RadioShack in December. 

Heading up that new RadioShack team is CEO Joe Magnacca, who with De Fazio, helped re-configure Duane Reade and later Walgreens as go-to shopping destinations and helped redefine what consumer’s connotation of what shopping in the drug channel entailed. 

Magnacca told analysts in late February that he likes how the new team at RadioShack is shaping up. "What you’ll see is that there’s a customer-first mentality inside our business, and probably has been for 5 or 6 weeks, that we’ll continue to build on. … We have a marketing strategy that touches different communities in different ways, and our objective is to really use social, mobile and mass media in a way that will encourage and drive traffic," he said. 

But RadioShack is still looking to round out its executive team. "We spent a lot of time looking at the [executive] team and where the voids are inside our business," Magnacca said. "Clearly, as you know from previous calls, we’re still without a chief merchandising officer inside our business. So that’s definitely a void," he said. "The work that I’m currently doing and assessing, it is getting very specific to roles and functions, so whether it’s store development, renovation programs, et cetera, and what expertise do we have inside our business. Again, I’m going to take much more of a four-wall view of the store and look at the voids as it relates to that and start to build the transformation story and putting the right people in place to ensure we can do that."

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New York City legislation would require hiding of tobacco displays

BY Alaric DeArment

NEW YORK — In spite of a court ruling striking down a ban on large-sized sugary drinks, New York mayor Michael Bloomberg has another health initiative in the works: a requirement that retailers hide tobacco products.

Bloomberg’s legislation, which would make New York the first city to keep tobacco products out of the sight of customers, will go to the city council for consideration. The New York Times noted that Bloomberg skipped this procedure with the soft drink rule.

The new regulations on tobacco would still be less stringent than those in San Francisco and Boston, which have banned pharmacy retailers from selling tobacco products altogether.

The mayor’s office noted that 28,000 public high school students in New York tried smoking for the first time in 2011, and 19,000 public high school students younger than 18 smoked, citing statistics indicating that young people frequently exposed to tobacco product displays are 2.5 times more likely to start smoking than those who are not exposed.

 

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J.KESSLER says:
Mar-19-2013 12:44 pm

Doesn't NYC have bigger problems to deal with than this? Like Bloomberg's last attempt at limiting soda for the good of the people. Next, he'll be mandating that all grocery stores hide the baked goods behind closed doors in the Bakery section because statistics probably show that 2.5 times more people purchase baked goods when on display, contributing to obesity. The best thing that the city council could do at this point is get the Mayor some psychological help, or at least some qualified training on human behavior. Mandate that he concentrate on what a Mayor's role is in the most famous city in the free world... like help to improve education, public safety, reduce poverty......... certainly not limit individual freedom and impede legitimate business.

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