Walgreens tops quarterly revenue estimates, but narrows profit outlook in ‘challenging’ economy

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
in
part
due
to
a “challenging”

retail
environment
in
the
U.S.

The
company
also
posted
a
steep
net
loss
for
the
quarter
as
it
recorded
a
hefty
nearly
$6
billion
charge
related
to
the
decline
in
value
of
its
investment
in
primary-care
provider VillageMD.
Walgreens
has

closed
140
VillageMD
clinics
amid
financial
woes
for
the
business,
which
it
sees
as
critical
to
its
ongoing
push
to
transform
from
a
major
drugstore
chain
into
a
large
health-care
company.

But
Walgreens
does
not
believe
the
VillageMD
charge “will
have
a
significant
impact
on
our
financial
position,
or
our
ability
to
invest
across
businesses
going
forward,”
Walgreens
global
CFO
Manmohan
Mahajan
said
during
an
earnings
call
Thursday.

The
results
come
as
Walgreens’
new
CEO,
Tim
Wentworth,
works
to
slash
costs
and
steer
the
company
out
of
a
rough
spot
with
a
slate
of

new
executives.
Shares
of
Walgreens
fell
30%
last
year
as
the
company
faced
weakening
demand
for
Covid
products,
low
pharmacy
reimbursement
rates,
an
unsteady
push
into
health
care
and
a
challenging
macroeconomic
environment. 

In
a
release
Thursday,
the
company
said
it
is
confident
it
will
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,
among
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
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
company’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
new
guidance
reflects
the
hurdles
facing
retailers
in
the
U.S.
and
an
early
wind-down
of
its
sales-leaseback
program.
It
also
takes
into
account
lower
earnings
due
to
Walgreens’
forward
sale
of
shares
of
drug
distributor
Cencora,
formerly
known
as
AmerisourceBergen.

The
company
said
a
stronger
performance
in
its
pharmacy
services
segment
and
a
lower
adjusted
effective
tax
rate
helped
to
offset
the
factors
dragging
on
its
earnings. 

But
Mahajan
said
Walgreens
expects
the
current
economic
backdrop
will “continue
to
negatively
impact
our
U.S.
retail
sales
in
the
short
term.”

Wentworth
noted
on
the
call
that
the
company
is “exploring
innovative
ways
to
boost
profitability
and
growth”
in
its
retail
pharmacy
division,
such
as
through
new
pharmacy
reimbursement
models.

The
company
did
not
give
a
new
revenue
forecast
for
the
fiscal
year.
Walgreens
has
not
provided
that
guidance
since
October,
when
it
said
it
sees

$141
billion
to
$145
billion
in
sales. 

The
company
reported
a
net
loss
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
the
same
period
a
year
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
company
booked
sales
of
$37.05
billion
in
the
quarter,
a
roughly
6%
jump
from
the
same
period
a
year
ago. 

The
company
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%
in
the
fiscal
second
quarter
compared
with
the
same
period
a
year
ago. 

Revenue
for
the
segment
came
in
at
$2.18
billion.

The
company
said
the
higher
sales
reflect
VillageMD’s
acquisition
of
multispecialty
care
provider
Summit
Health
and
growth
across
all
businesses
in
the
segment
on
a
pro-forma
basis.

VillageMD
sales
grew
20%
due
to
same-clinic
growth,
among
other
factors.
Sales
from
the
segment’s
specialty
pharmacy
company,
Shields
Health
Solutions,
grew
13%,
due
to
new
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
such
as
cancer
and
rheumatoid
arthritis.

Meanwhile,
Walgreens’

U.S.
retail
pharmacy
segment
generated
$28.86
billion
in
sales
in
the
fiscal
second
quarter,
an
increase
of
almost
5% from
the
same
period
last
year.

That
segment
operates
more
than
8,000
drugstores
across
the
U.S.,
which
sell
prescription
and
nonprescription
drugs
as
well
as
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.
Comparable
sales
climbed
8.7%
due
to
price
inflation
in
brand
medications
and “strong
execution”
in
pharmacy
services,
largely
driven
by
the
company’s
vaccine
portfolio.

Total
prescriptions
filled
in
the
quarter
including
immunizations
totaled
305.7
million,
a
more
than
2%
increase
from
the
same
period
a
year
ago. 

Retail
sales
for
the
quarter
fell
4.5%
from
the
prior-year
quarter,
and
comparable
retail
sales
declined
4.3%.
The
company
pointed
to
a
challenging
retail
environment
and
a
weaker
respiratory
season,
among
other
factors. 

Walgreens’

international
segment,
which
operates
more
than
3,000
retail
stores
abroad,
posted
$6.02
billion
in
sales
in
the
fiscal
second
quarter.
That’s
an
increase
of
more
than
6%
from
the
year-ago
period. 

The
company
said
sales
from
its
U.K.
subsidiary,
Boots,
grew
3%.

When
asked
on
the
call
about


Eli
Lilly‘s
new
direct-to-consumer
website
aimed
at
expanding
access
to
its
weight
loss
drug
Zepbound,
Wentworth
did
not
comment
on
the
program
specifically.

But
he
noted
that
the
company
is
a “natural
partner”
for
pharmaceutical
companies
that
may “want
to
go
directly
to
patients
for
a
particular
product,
where
the
normal
supply
chain,
reimbursement
model,
et
cetera
isn’t
working
effectively.”

As
an
example,
Wenworth
pointed
to
GLP-1s,
a
new
class
of
weight
loss
and
diabetes
drugs
that
includes
Zepbound.
Those
drugs
must
be
taken
chronically
but
carry
hefty
price
tags,
which
can
be
a
hurdle
for
both
patients
and
insurance
plans
and
other
payers.

Walgreens
is “uniquely
positioned”
to
distribute
drugs
and
serve
as
a “clinically
aligned
partner”
that
can
help
patients
navigate
their
treatment
safely,
according
to
Wentworth.