An individual rides past a Walgreens truck, owned by the Walgreens Boots Alliance, Inc., in Manhattan, Recent York City, U.S., November 26, 2021.
Andrew Kelly | Reuters
Walgreens on Thursday reported fiscal second-quarter sales that beat Wall Street’s expectations, but lowered the high end of its full-year adjusted earnings outlook partially resulting from a “difficult” retail environment within the U.S.
The corporate also posted a steep net loss for the quarter because it recorded a hefty nearly $6 billion charge related to the decline in value of its investment in primary-care provider VillageMD. Walgreens has been closing dozens of VillageMD clinics amid financial woes and sees the business as critical to its ongoing push to remodel from a serious drugstore chain right into a large health-care company.
The outcomes come as Walgreens’ latest CEO, Tim Wentworth, works to slash costs and steer the corporate out of a rough spot. Shares of Walgreens fell 30% last yr as the corporate faced weakening demand for Covid products, low pharmacy reimbursement rates, an unsteady push into health care and a difficult macroeconomic environment.
In a release Thursday, the corporate said it’s confident it’s going to meet its goal of saving $1 billion during fiscal 2024 through its ongoing cost-cutting program. Walgreens has laid off employees, closed unprofitable stores and used artificial intelligence to make its supply chain more efficient, amongst other efforts.
Here’s what Walgreens reported for the quarter, compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly often known as Refinitiv:
- Earnings per share: $1.20 adjusted vs. 82 cents expected
- Revenue: $37.05 billion vs. $35.86 billion expected
Walgreens narrowed its fiscal 2024 adjusted earnings guidance to between $3.20 and $3.35 per share. That compares with the corporate’s previous outlook of $3.20 to $3.50 per share. Analysts surveyed by LSEG expect full-year adjusted earnings of $3.24 per share.
Walgreens said the brand new guidance reflects the hurdles facing retailers within the U.S. and an early wind-down of its sales-leaseback program. It also takes into consideration lower earnings resulting from Walgreens’ forward sale of shares of drug distributor Cencora, formerly often known as AmerisourceBergen.
The corporate said a stronger performance in its pharmacy services segment and a lower adjusted effective tax rate helped to offset the aspects dragging on its earnings.
The corporate didn’t give a latest revenue forecast for the fiscal yr. Walgreens has not provided that guidance since October, when it said it sees $141 billion to $145 billion in sales.
The corporate reported a net lack of $5.91 billion, or $6.85 per share, for the quarter. That compares with a net income of $703 million, or 81 cents per share, for a similar period a yr ago. a
Excluding certain items, including the $5.8 billion non-cash charge related VillageMD, adjusted earnings per share were $1.20 for the quarter.
The corporate booked sales of $37.05 billion within the quarter, a roughly 6% jump from the identical period a yr ago.
Walgreens sees growth across all divisions
The corporate said that increase reflects sales growth across its three business segments. But Walgreens’ U.S. health-care division stood out as sales jumped about 33% within the fiscal second quarter compared with the identical period a yr ago.
Revenue for the segment got here in at $2.18 billion.
The corporate said the upper sales reflect VillageMD’s acquisition of multispecialty care provider Summit Health and growth across all businesses within the segment on a pro-forma basis.
VillageMD sales grew 20% resulting from same-clinic growth, amongst other aspects. Sales from the segment’s specialty pharmacy company, Shields Health Solutions, grew 13%, resulting from latest contracts and expansions of current partnerships.
Specialty pharmacies are designed to deliver medications with unique handling, storage and distribution requirements, often for patients with complex conditions similar to cancer and rheumatoid arthritis.
Walgreens and VillageMD
Source: Walgreens
Meanwhile, Walgreens’ U.S. retail pharmacy segment generated $28.86 billion in sales within the fiscal second quarter, a rise of just about 5% from the identical period last yr.
That segment operates greater than 8,000 drugstores across the U.S., which sell prescription and nonprescription drugs in addition to health and wellness, beauty, personal care, and food products.
Walgreens said pharmacy sales for the quarter rose 8.2% compared with the year-ago quarter, as comparable sales climbed 8.7% resulting from price inflation in brand medications and “strong execution” in pharmacy services.
Total prescriptions filled within the quarter including immunizations totaled 305.7 million, a greater than 2% increase from the identical period a yr ago.
Retail sales for the quarter fell 4.5% from the prior-year quarter, and comparable retail sales declined 4.3%. The corporate pointed to a difficult retail environment and a weaker respiratory season, amongst other aspects.
Walgreens’ international segment, which operates greater than 3,000 retail stores abroad, posted $6.02 billion in sales within the fiscal second quarter. That is a rise of greater than 6% from the year-ago period.
The corporate said sales from its U.K. subsidiary, Boots, grew 3%.