Walgreens Shoe Alliance on Tuesday lowered its full-year earnings guidance because it fell in need of Wall Street expectations for the third fiscal quarter on account of lower consumer spending and a drop in demand for Covid vaccines and tests.
The retail pharmacy chain lowered its earnings guidance to a variety of $4.00 to $4.05 per share for the total yr, down from its previous forecast of $4.45 to $4.65 per share.
CEO Rosalind Brewer told analysts through the company’s earnings call that she was upset with the lowered earnings projections for this yr.
Brewer said weak demand for Covid vaccines and lower consumer spending are prone to proceed next yr. She said the corporate is closing, with the top of fiscal stimulus and the resumption of student loan repayments as potential roadblocks.
“Our client is under pressure from higher inflation and rates of interest, lower SNAP advantages and tax refunds, and an uncertain economic outlook. It’s backing away from discretionary and seasonal spending and is aware of promotional efforts,” said Brewer.
Brewer said it was increasing Walgreen’s cost-cutting initiative to $4.1 billion, which incorporates $800 million in savings for fiscal yr 2024. The corporate can also be working to make its healthcare segment more profitable, she said.
Brewer said that while she was not joyful with Tuesday’s results, Walgreens had the appropriate technique to drive future growth.
Walgreens shares fell about 9% in premarket trading after the discharge.
Here’s how Walgreens fared in its own third fiscal quarter in comparison with Wall Street expectations based on estimates by analysts surveyed by Refinitiv:
- Profits: Adjusted $1.00 per share vs. $1.07 expected.
- Income: USD 35.42 billion in comparison with the expected USD 34.24 billion.
The profit loss is the primary time Walgreens has performed below analyst expectations since July 2020.
Nonetheless, the corporate exceeded revenue expectations and saw sales increase with sales of $35.4 billion within the quarter – 8.6% higher than revenue of $32.6 billion in the identical period a yr earlier – driven by growth within the pharmacy segment retail and healthcare.
Walgreens posted a net profit of $118 million for the quarter, or 14 cents per share unadjusted, down 59% from the $289 million in revenue the corporate reported in the identical quarter last yr. In keeping with the corporate, the decrease resulted primarily from lower operating revenues.
Walgreens’ U.S. retail pharmacy segment generated roughly $28 billion in sales through the quarter, up 4.4% over the identical period last yr. Comparable sales in individual locations increased by 7%.
Walgreens pharmacy sales also increased 6.3% over the identical quarter last yr, with comparable sales up nearly 10% on account of price inflation of branded drugs.
Total prescriptions filled within the quarter, including vaccinations, rose 0.1% to a complete of 305 million. Covid vaccines administered during this era fell by 83% to 800,000, down from 4.7 million in the identical period last yr.
“We have called Covid as a wild card heading into the quarter and unfortunately we have seen less patient willingness to be vaccinated,” Brewer said.
Walgreens expects to manage 9 to 10 million Covid vaccines in 2024, in keeping with a typical flu season, up from the 12.5 million projected in 2023, Brewer said.
Sales in Walgreens’ U.S. healthcare segment totaled $2 billion, up $1.4 billion from the identical period last yr.
Primary care provider VillageMD, which incorporates urgent care provider Summit Health, saw revenue growth of twenty-two%. Walgreens’ sales of home health care company CareCentrix increased 15% due to additional service offerings.
Still, the healthcare segment reported a $113 million loss within the quarter before interest, taxes, amortization, which was driven by VillageMD’s expansion and fewer patient visits to Summit Health CityMD’s urgent care clinics on account of a weaker respiratory viral season.
“While we’re confident within the scope and scale of our healthcare business, we’re upset with the pace of our road to profitability,” John Driscoll, president of Walgreens’ global health care business, told analysts.
“We’re taking immediate motion to enhance profitability,” said Driscoll. “We anticipate this yr will remain a transitional yr as we take motion to deliver value and increase profitability.”