In an aerial view, a customer enters a Walgreens store on January 4, 2024 in San Pablo, California.
Justin Sullivan | Getty Images
“We assumed … that in the second half the consumer would strengthen somewhat,” but “that’s not the case,” Walgreens CEO Tim Wentworth told CNBC.
He added that “the consumer is absolutely stunned by the absolute prices of things, and the fact that some of them aren’t inflating doesn’t really change their resistance to current prices. So we’ve had to be very careful, especially in discretionary things.
Walgreens shares fell more than 5% in premarket trading Thursday following the results.
Walgreens nevertheless beat revenue estimates for the quarter thanks to strong performance in its health care segment. The company views this business division as critical to its ongoing efforts to grow from a large pharmacy chain to a large healthcare company.
The results come as Walgreens strives to cut costs after a difficult last year marked by low pharmacy reimbursement rates, weakening demand for Covid products and a challenging macroeconomic environment.
The company said Friday it is simplifying its U.S. healthcare portfolio and finalizing plans to close underperforming U.S. stores over several years, among other ongoing cost-cutting efforts.
“75% of our stores are generating 100% of our profitability today,” Wentworth said. “That means we’re looking carefully at the others, we’re going to finalize a number that we’ll close out…”
Here’s what Walgreens reported compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: 63 cents adjusted versus 68 cents expected
- Income: $36.4 billion versus $35.94 billion expected
Walgreens reported sales of $36.4 billion for the quarter, up 2.6% from the same period last 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 provide a new revenue forecast for the fiscal year. The company has not given such guidance since October, when it said it expected sales of between $141 billion and $145 billion.
Walgreens reported growth across all three of its business divisions during the fiscal third quarter. But the company’s U.S. health division stood out, with sales up 7.6% from the same period a year earlier.
The segment’s revenue amounted to $2.13 billion. Analysts had expected revenue of $2.08 billion, according to estimates compiled by FactSet.
The company said the sales increase reflects primary care provider VillageMD and specialty pharmaceutical company Shields Health Solutions. Shields saw sales jump 24% during the period, driven by growth in existing partnerships.
Specialty pharmacies are designed to dispense medications with unique handling, storage and dispensing requirements, often for patients with complex diseases such as cancer and rheumatoid arthritis.
Walgreens and Village®
Source: Walgreens
These results come a quarter after Walgreens posted a large net loss due to a nearly $6 billion charge related to the decline in the value of its investment in VillageMD. The company now plans to close 160 VillageMD clinics, company executives announced during the company’s fiscal second-quarter earnings conference call in March.
“We are working with their management team to ultimately remain an investor, but significantly reduce our investment and gain liquidity so we can reinvest in the retail pharmacy business that represents our future,” Wentworth told CNBC of the company investment. in VillageMD.
Walgreens’ U.S. retail pharmacy segment generated revenue of $28.5 billion in the fiscal third quarter, an increase of 2.3% from the same period last year. Analysts had expected revenue of $28.34 billion, according to estimates compiled by FactSet.
This segment operates more than 8,000 pharmacies across the United States, which sell prescription and over-the-counter medications as well as health and wellness, beauty, personal care and dietary products.
The company said the sales growth came entirely from comparable pharmacy sales and was partially offset by a decline in retail revenue.
Walgreens said drugstore sales for the quarter increased 4.4% and comparable drugstore sales increased 5.7% from the prior-year period due to price inflation brand name drugs and prescription growth.
Total prescriptions filled during the quarter, including vaccines, were 306.4 million, an increase of 0.5% from the same period last year.
Retail sales for the quarter fell 4% from the year-ago quarter, and comparable retail sales declined 2.3%. The company pointed to a “challenging” retail environment, among other factors.
Walgreens’ international segment, which operates more than 3,000 overseas retail stores, reported revenue of $5.73 billion during the fiscal third quarter. This represents an increase of 2.8% compared to the same period last year.
The company said sales at its UK-based pharmacy chain, Boots, rose 1.6%.
Walgreens has reportedly abandoned plans for a possible IPO of the subsidiary and is in informal talks with potential buyers, including private equity firms, Bloomberg News reported earlier this month.
But Wentworth said Walgreens has no plans to sell the chain.
“Right now, there’s no doubt that Boots is a major contributor for us,” he told CNBC.
— CNBC’s Bertha Coombs contributed to this report.
News Source : www.cnbc.com
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