Walgreens tops quarterly income estimates, however narrows revenue outlook in ‘difficult’ economic system


An individual rides previous a Walgreens truck, owned by the Walgreens Boots Alliance, Inc., in Manhattan, New York Metropolis, U.S., November 26, 2021. 

Andrew Kelly | Reuters

Walgreens on Thursday reported fiscal second-quarter gross sales that beat Wall Road’s expectations, however lowered the excessive finish of its full-year adjusted earnings outlook partially because of a “difficult” retail atmosphere within the U.S.

The corporate additionally posted a steep web loss for the quarter because it recorded a hefty practically $6 billion cost associated to the decline in worth of its funding in primary-care supplier VillageMD. Walgreens has closed 140 VillageMD clinics amid monetary woes for the enterprise, which it sees as vital to its ongoing push to remodel from a significant drugstore chain into a big health-care firm.

However Walgreens doesn’t consider the VillageMD cost “may have a major affect on our monetary place, or our potential to speculate throughout companies going ahead,” Walgreens world CFO Manmohan Mahajan stated throughout an earnings name Thursday.

The outcomes come as Walgreens’ new CEO, Tim Wentworth, works to slash prices and steer the corporate out of a tough spot with a slate of new executives. Shares of Walgreens fell 30% final 12 months as the corporate confronted weakening demand for Covid merchandise, low pharmacy reimbursement charges, an unsteady push into well being care and a difficult macroeconomic atmosphere. 

In a launch Thursday, the corporate stated it’s assured it’s going to meet its aim of saving $1 billion throughout fiscal 2024 by its ongoing cost-cutting program. Walgreens has laid off staff, closed unprofitable shops and used synthetic intelligence to make its provide chain extra environment friendly, amongst different efforts.

This is what Walgreens reported for the quarter, in contrast with what Wall Road was anticipating, primarily based on a survey of analysts by LSEG, previously often known as Refinitiv:

  • Earnings per share: $1.20 adjusted vs. 82 cents anticipated
  • Income: $37.05 billion vs. $35.86 billion anticipated

Walgreens narrowed its fiscal 2024 adjusted earnings steerage to between $3.20 and $3.35 per share. That compares with the corporate’s earlier outlook of $3.20 to $3.50 per share. Analysts surveyed by LSEG count on full-year adjusted earnings of $3.24 per share.

Walgreens stated the brand new steerage displays the hurdles dealing with retailers within the U.S. and an early wind-down of its sales-leaseback program. It additionally takes under consideration decrease earnings because of Walgreens’ ahead sale of shares of drug distributor Cencora, previously often known as AmerisourceBergen.

The corporate stated a stronger efficiency in its pharmacy providers section and a decrease adjusted efficient tax charge helped to offset the components dragging on its earnings. 

However Mahajan stated Walgreens expects the present financial backdrop will “proceed to negatively affect our U.S. retail gross sales within the quick time period.”

Wentworth famous on the decision that the corporate is “exploring modern methods to spice up profitability and progress” in its retail pharmacy division, akin to by new pharmacy reimbursement fashions.

The corporate didn’t give a brand new income forecast for the fiscal 12 months. Walgreens has not supplied that steerage since October, when it stated it sees $141 billion to $145 billion in gross sales. 

The corporate reported a web lack of $5.91 billion, or $6.85 per share, for the quarter. That compares with a web earnings of $703 million, or 81 cents per share, for a similar interval a 12 months in the past. a

Excluding sure gadgets, together with the $5.8 billion non-cash cost associated VillageMD, adjusted earnings per share had been $1.20 for the quarter.

The corporate booked gross sales of $37.05 billion within the quarter, a roughly 6% bounce from the identical interval a 12 months in the past. 

Walgreens sees progress throughout all divisions

The corporate stated that enhance displays gross sales progress throughout its three enterprise segments. However Walgreens’ U.S. health-care division stood out as gross sales jumped about 33% within the fiscal second quarter in contrast with the identical interval a 12 months in the past. 

Income for the section got here in at $2.18 billion.

The corporate stated the upper gross sales mirror VillageMD’s acquisition of multispecialty care supplier Summit Well being and progress throughout all companies within the section on a pro-forma foundation.

VillageMD gross sales grew 20% because of same-clinic progress, amongst different components. Gross sales from the section’s specialty pharmacy firm, Shields Well being Options, grew 13%, because of new contracts and expansions of present partnerships.

Specialty pharmacies are designed to ship medicines with distinctive dealing with, storage and distribution necessities, usually for sufferers with advanced circumstances akin to most cancers and rheumatoid arthritis.

Walgreens and VillageMD

Supply: Walgreens

In the meantime, Walgreens’ U.S. retail pharmacy section generated $28.86 billion in gross sales within the fiscal second quarter, a rise of virtually 5% from the identical interval final 12 months.

That section operates greater than 8,000 drugstores throughout the U.S., which promote prescription and nonprescription medication in addition to well being and wellness, magnificence, private care, and meals merchandise. 

Walgreens stated pharmacy gross sales for the quarter rose 8.2% in contrast with the year-ago quarter. Comparable gross sales climbed 8.7% because of worth inflation in model medicines and “sturdy execution” in pharmacy providers, largely pushed by the corporate’s vaccine portfolio.

Whole prescriptions stuffed within the quarter together with immunizations totaled 305.7 million, a greater than 2% enhance from the identical interval a 12 months in the past. 

Retail gross sales for the quarter fell 4.5% from the prior-year quarter, and comparable retail gross sales declined 4.3%. The corporate pointed to a difficult retail atmosphere and a weaker respiratory season, amongst different components. 

Walgreens’ worldwide section, which operates greater than 3,000 retail shops overseas, posted $6.02 billion in gross sales within the fiscal second quarter. That is a rise of greater than 6% from the year-ago interval. 

The corporate stated gross sales from its U.Okay. subsidiary, Boots, grew 3%.

When requested on the decision about Eli Lilly‘s new direct-to-consumer web site aimed toward increasing entry to its weight reduction drug Zepbound, Wentworth didn’t touch upon this system particularly.

However he famous that the corporate is a “pure companion” for pharmaceutical firms that will “need to go on to sufferers for a selected product, the place the traditional provide chain, reimbursement mannequin, et cetera is not working successfully.”

For example, Wenworth pointed to GLP-1s, a brand new class of weight reduction and diabetes medication that features Zepbound. These medication should be taken chronically however carry hefty worth tags, which generally is a hurdle for each sufferers and insurance policy and different payers.

Walgreens is “uniquely positioned” to distribute medication and function a “clinically aligned companion” that may assist sufferers navigate their therapy safely, in response to Wentworth.

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