In an aerial view, a customer enters a Walgreens store in San Pablo, California, on January 4, 2024.
Justin Sullivan | Getty Images
shares walgreens The company plunged more than 14% on Thursday report Third-quarter profit fell short of expectations and it sharply lowered its full-year adjusted profit outlook, citing a “challenging” environment for pharmacies and U.S. consumers.
The retail pharmaceutical giant now expects fiscal 2024 adjusted earnings per share of $2.80 to $2.95. That compares with the company’s previous forecast of $3.20 to $3.35 per share.
Walgreens CEO Tim Wentworth told CNBC, “We assumed…that consumers would be stronger in the second half of the year,” but “that’s not the case.”
He added, “Consumers are absolutely shocked by the sheer price of items, and the fact that some of them may not have gone up doesn’t actually change their resistance to current pricing. So we have to get very keen, especially on on discretionary matters.
Still, Walgreens beat revenue estimates for the quarter on strong performance in its health care segment. The company views the business unit as critical to its continued push to transform from a large pharmacy chain into a major health care company.
The achievement comes as Walgreens works to cut costs after a tough last year. Pharmacy reimbursement is low Interest rates, weak demand for COVID-19 products and a challenging macroeconomic environment.
The company said on Friday it was simplifying its U.S. healthcare portfolio and finalizing plans to close U.S. stores that have underperformed for years, among other ongoing cost-cutting measures.
“Today, 75 percent of our stores are 100 percent profitable,” Wentworth said. “That means we will look carefully at the other issues and we will finalize a number that we will close…”
Walgreens’ report compared with Wall Street expectations, according to a survey of analysts by London Stock Exchange Group (LSEG):
- Earnings per share: Adjusted 63 cents, expected 68 cents
- income: US$36.4 billion, expected US$35.94 billion
Walgreens’ sales for the quarter were $36.4 billion, an increase of 2.6% over the same period last year.
The company reported net income for the quarter of $344 million, or 40 cents per share. This compares with net income of $118 million, or 14 cents per share, in the same period last year.
Excluding certain items, adjusted earnings per share for the quarter were 63 cents.
Walgreens did not provide a new revenue forecast for the current fiscal year. The company hasn’t provided this guidance since October, when it said it expected sales of $141 billion to $145 billion.
Healthcare sector performs strongly
Walgreens reported growth in all three of its business segments in the fiscal third quarter. But the company’s U.S. healthcare unit performed well, with sales growing 7.6% compared with the same period last year.
The segment’s revenue was $2.13 billion. Analysts had expected sales of $2.08 billion, according to estimates compiled by FactSet.
The company said the sales growth was driven by primary care provider VillageMD and specialty pharmaceutical company Shields Health Solutions. Shields’ sales grew 24% during the period, driven by growth in existing partnerships.
Specialty pharmacies are designed to deliver medications with unique handling, storage and dispensing requirements, often for patients with complex conditions such as cancer and rheumatoid arthritis.
Walgreens and VillageMD
Source: Walgreens
The results came a quarter after Walgreens posted a massive net loss, recording a hefty charge of nearly $6 billion related to the decline in the value of its investments. Doctor of Rural Medicine. Company executives announced during its fiscal second-quarter earnings call in March that the company now plans to close 160 VillageMD clinics.
Wentworth said of the company’s investment: “We are working with their management team to ultimately remain an investor but meaningfully reduce our investment and gain some liquidity so that we can invest in representatives Our future retail pharmacy business.
Sales of Walgreens’ U.S. retail pharmacy division reached $28.5 billion in the third fiscal quarter, a 2.3% increase from the same period last year. Analysts had expected sales of $28.34 billion, according to estimates compiled by FactSet.
The segment operates more than 8,000 pharmacies in the United States, selling prescription and over-the-counter drugs as well as health and wellness, beauty, personal care and food products.
The company said the sales growth came entirely from comparable pharmacy sales and was partially offset by lower retail revenue.
Walgreens said that due to rising brand-name drug prices and growth in prescription drugs, pharmacy sales increased 4.4% year-over-year in the quarter, and sales at similar pharmacies increased 5.7%.
Total prescriptions, including vaccines, for the quarter were 306.4 million, an increase of 0.5% from the same period last year.
Retail sales this quarter fell 4% from the same period last year and 2.3% from retail sales. The company noted that, among other factors, the retail environment was “challenging.”
Walgreens’ international division operates more than 3,000 retail stores overseas and generated fiscal third-quarter sales of $5.73 billion. An increase of 2.8% compared with the same period last year.
The company said sales at its UK pharmacy chain Boots rose 1.6%.
Walgreens has reportedly canceled plans for a potential initial public offering of the unit and is in informal talks with potential buyers including private equity firms, according to Bloomberg report earlier this month.
But Wentworth said Walgreens has no plans to sell the chain.
“Right now, there’s no question that Boots is our main contributor,” he told CNBC.
— CNBC’s Bertha Coombs contributed to this report.
About The Author
