From above, a customer walks into a Walgreens store on January 4, 2024 in San Pablo, California.
Justin Sullivan | beautiful images
Walgreens on Thursday reported Fiscal third-quarter earnings missed expectations and lowered the full-year adjusted profit outlook, citing a “challenging” environment for U.S. pharmacies and consumers.
The retail pharmacy giant now expects fiscal 2024 adjusted earnings of $2.80 to $2.95 per share. This number is equivalent to the company previous outlook between $3.20 and $3.35 per share.
“We thought… in the second half of the year, consumers would be more supportive” but “that’s not true,” Walgreens CEO Tim Wentworth told CNBC.
He added that “consumers are absolutely stunned by the sheer price of things, and the fact that some of them may not go as high doesn’t really change their resistance to price levels.” now. So we have to be really mindful, especially in the discretionary stuff.”
Still, Walgreens topped revenue estimates for the quarter thanks to strong results in its health care segment, which the company sees as crucial to its ongoing transformation from a large pharmacy chain into a large health care company.
The results came as Walgreens worked to cut costs after a difficult year marked by pharmacy reimbursement rates are low price, Weak demand for Covid products and the challenging macroeconomic environment.
The company on Friday said it is simplifying its U.S. healthcare portfolio and finalizing a multi-year plan to close underperforming U.S. stores, along with retrenchment efforts. Other ongoing costs.
“75% of our stores are 100% profitable for us today,” Wentworth said. “That means the other issues that we’re looking at closely, we’re going to finalize a number that we’re going to close….”
Here’s what Walgreens reported compared to what Wall Street expected, based on LSEG’s survey of analysts:
- Earnings per share: 63 cents revised versus 68 cents expected
- Revenue: $36.4 billion vs. $35.94 billion expected
Walgreens had revenue of $36.4 billion in the quarter, up 2.6% year-over-year.
The company reported net income of $344 million, or 40 cents per share, for the quarter. That compares with net income of $118 million, or 14 cents per share, in the same period a year ago.
Excluding certain items, adjusted earnings were 63 cents per share for the quarter.
Walgreens did not issue a new revenue forecast for the fiscal year. The company has not issued that guidance since October, when it said it expected it $141 billion to $145 billion in sales.
Strong activity in the health care department
Walgreens reported growth across its three business segments in the fiscal third quarter. But the company’s U.S. healthcare division stood out, with sales up 7.6% year-over-year.
Revenue of this segment reached 2.13 billion USD. Analysts had expected revenue of $2.08 billion, according to estimates compiled by FactSet.
The company said higher sales reflected primary care provider VillageMD and specialty pharmacy company, Shields Health Solutions. Shields saw sales increase 24% in the period, driven by growth in existing partnerships.
Specialty pharmacies are designed to provide drugs with unique handling, storage and distribution requirements, often for patients with complex diseases such as cancer and rheumatoid arthritis.
Walgreens and VillageMD
Source: Walgreens
Those results came a quarter after Walgreens posted a hefty net loss as it took a hefty charge of nearly $6 billion related to the decline in the value of its investments in VillageMD. The company now plans to close 160 VillageMD clinics, executives announced during the company’s fiscal Q2 earnings call in March.
“We are working with their management team to ultimately remain investors, but significantly reduce our investment as well as gain some liquidity so we can invest back into the retail pharmacy business that represents our future.” at VillageMD.
Walgreens’ U.S. retail pharmacy segment generated revenue of $28.5 billion in the fiscal third quarter, up 2.3% year-over-year. Analysts had expected revenue of $28.34 billion, according to estimates compiled by FactSet.
That segment operates more than 8,000 pharmacies across the United States, selling prescription and over-the-counter drugs as well as health, beauty, personal care and food products.
The company said sales growth came entirely from comparable pharmaceutical sales and was partially offset by a decline in retail sales.
Walgreens said drug sales in the quarter increased 4.4% and comparable drug sales increased 5.7% year over year due to brand-name drug price inflation and prescription growth.
Prescriptions filled during the quarter including vaccines totaled 306.4 million, up 0.5% year over year.
Retail sales for the quarter decreased 4% compared to the previous quarter and comparable retail sales decreased 2.3%. The company pointed to a “challenging” retail environment among other factors.
Walgreens’ international segment, which operates more than 3,000 retail stores overseas, had sales of $5.73 billion in the fiscal third quarter. That is a 2.8% increase over the same period last year.
The company said sales from UK-based pharmacy chain Boots rose 1.6%.
Walgreens has reportedly scrapped plans for an initial public offering of its subsidiary and is in informal talks with potential buyers, including private equity firms, Bloomberg News said. reported in the first day of this month.
But Wentworth said Walgreens has no plans to sell the chain.
“Right now, there’s no doubt that boots are a big contributor for us,” he told CNBC.
— CNBC’s Bertha Coombs contributed to this report.
