Walgreens Boots Alliance on Tuesday slashed its full-year earnings guidance because it fell wanting Wall Street expectations for its fiscal third quarter attributable to lower consumer spending and a drop in demand for Covid vaccines and testing.
The retail pharmacy chain lowered its earnings guidance to a variety of $4.00 to $4.05 per share for the complete 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 disenchanted by the reduced profit guidance for the yr.
Brewer said soft demand for Covid vaccines and lower consumer spending is prone to extend into next yr. She said the corporate is closing watching the top of fiscal stimulus and resumption of student loan payments as potential headwinds.
“Our customer is feeling the strain of upper inflation and rates of interest, lower SNAP advantages and tax refunds and an uncertain economic outlook. They’re pulling back on discretionary and seasonal spending and responding strongly to promotional activity,” Brewer said.
Brewer said she is 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 extend profitability of its health-care segment, she said.
Brewer said although she’s not satisfied with Tuesday’s results, Walgreens had the suitable technique to drive future growth.
Shares of Walgreens fell roughly 9% in premarket trading following the discharge.
Here’s how Walgreens performed in its fiscal third quarter compared with what Wall Street was expecting based on analyst estimates polled by Refinitiv:
- Earnings: $1.00 per share adjusted, vs. $1.07 expected.
- Revenue: $35.42 billion, vs. $34.24 billion expected.
The earnings miss is the primary time Walgreens has underperformed analyst expectations since July 2020.
But the corporate beat revenue expectations and posted sales growth, booking sales of $35.4 billion within the quarter — 8.6% higher than revenue of $32.6 billion in the identical period a yr earlier — attributable to growth in its retail pharmacy and health-care segments.
Walgreens booked net profit of $118 million for the quarter, or 14 cents per share unadjusted, a 59% drop from the $289 million in income the corporate reported for a similar quarter last yr. The decline was due primarily to lower operating income, based on the corporate.
Walgreens’ U.S. retail pharmacy segment generated about $28 billion in sales for the quarter, a rise of 4.4% compared with the identical period last yr. Comparable sales at individual locations rose 7%.
Walgreens pharmacy sales also increased 6.3% compared with the identical quarter last yr, with comparable sales up nearly 10% attributable to price inflation in brand medications.
Total prescriptions filled within the quarter, including immunizations, increased by 0.1% for a complete of 305 million. Covid vaccines administered through the period plummeted 83% to 800,000, down from 4.7 million in the identical period last yr.
“We had called out Covid as a wildcard heading into the quarter and have unfortunately seen less patient willingness to vaccinate,” Brewer said.
Walgreens expects to manage 9 million to 10 million Covid vaccines in 2024, in step with a typical flu season, compared with 12.5 million projected vaccinations in 2023, Brewer said.
Sales in Walgreens U.S. health-care segment got here in at $2 billion, a $1.4 billion increase compared with the identical period last yr.
Primary-care provider VillageMD, which incorporates urgent care provider Summit Health, saw revenue grow by 22%. Sales at Walgreens at-home health-care provider CareCentrix increased 15% attributable to additional service offerings.
Still, the health-care segment took a lack of $113 million within the quarter before interest, tax, depreciation and amortization, driven by an expansion of VillageMD and fewer patient visits at Summit Health’s CityMD urgent care clinics attributable to a weaker respiratory virus season.
“While we’re confident within the range and scale of our health-care business, we’re disenchanted with the pace of our path to profitability,” John Driscoll, president of Walgreens health-care business, told analysts through the company’s Tuesday call.
“We’re taking immediate actions to drive improved profitability,” Driscoll said. “We anticipate this yr will remain a transition yr as we take motion to deliver value and drive profitability.”
