Walgreens Boots Alliance on Thursday exceeded fiscal fourth-quarter gross sales expectations, as the pharmacy chain turns itself right into a extra health-care targeted firm.
The drugstore chain mentioned it anticipates full-year adjusted earnings per share of $4.45 to $4.65 within the coming fiscal yr, which is about in keeping with what Wall Street anticipated. Yet Walgreens mentioned its enterprise development will face robust comparisons because it laps robust demand for Covid vaccines and will get hits by the power of the greenback.
The firm’s shares rose over 5% Thursday.
Walgreens reported its earnings on the identical day as a hotter-than-expected inflation report from the federal government. On a name with buyers, Walgreens CEO Roz Brewer acknowledged the more durable financial backdrop, however mentioned the corporate is in a very good place. Unlike big-box retailers, she mentioned the pharmacy chain doesn’t rely on the sale of big-ticket objects. It has expanded different income streams, together with its promoting enterprise. And she mentioned it sells many “want now classes” from toothpaste to medicine.
Plus, she mentioned, extra individuals acknowledge the significance of investing of their well being.
“With inflation at four-decade highs, customers are expressing uncertainty in regards to the future and searching for worth,” she mentioned. “At the identical time, we all know that well being and wellness will at all times be a precedence and more and more so after Covid-19.”
Here’s what the corporate reported in contrast with what analysts have been anticipating for its fourth quarter ended Aug. 31, based mostly on Refinitiv knowledge:
Earnings per share: 80 cents, adjusted, vs. 77 cents expectedRevenue: $32.45 billion vs. $32.09 billion anticipated
Sales declined from the earlier yr’s quarter. Including sure prices, Walgreens swung to a loss within the three-month interval. Its internet loss was $415 million, or 48 cents per share, in contrast with internet earnings of $627 million, or 72 cents per share, a yr earlier.
On a name with buyers, Global CFO James Kehoe mentioned Walgreens’ revenue took the most important hit from a $780 million noncash impairment cost in its Boots UK enterprise associated to logos and licenses. It additionally had prices related to its long-term value administration program, because it shuttered some shops. A yr in the past, Walgreens laid out a cost-savings objective of $3.3 billion by 2024.
Walgreens has made important investments to remodel from a serious drugstore chain to a big health-care firm. It is opening a whole lot of physician workplaces with VillageMD. It invested $5.2 billion to grow to be majority proprietor of the primary-care firm. It lately introduced plans to speed up acquisitions of two different corporations: CareCentrix, which coordinates care and advantages for at-home care, and Shields Health Solutions, a specialty pharmacy firm.
Brewer mentioned in a information launch that the approaching fiscal yr “will probably be a yr of accelerating core development and quickly scaling our U.S. Healthcare enterprise.”
At the tip of the quarter, VillageMD had 334 physician workplaces — together with 152 which might be subsequent to Walgreens shops. Walgreens additionally has 70 shops with Health Corners, a chosen area the place a registered nurse or pharmacist can schedule a mammogram, display screen a affected person for hypertension or diabetes or assist with different health-care wants.
Walgreens had a decrease bar to clear for quarterly expectations, as Wall Street tempered estimates because it anticipated demand for Covid pictures and exams to chill, mentioned John Boylan, an fairness analysis analyst for well being care at Edward Jones. He mentioned the corporate’s U.S. health-care unit, the expansion engine Walgreens is leaning on, remains to be in early days however reveals some constructive indicators.
On Thursday, Walgreens raised its outlook for the health-care division. It mentioned it now anticipates a gross sales goal of $12 billion, fairly than $11 billion, for fiscal 2025. It has additionally made management bulletins, tapping CareCentrix CEO John Driscoll as president of its U.S. Healthcare division and elevating Walgreens Chief Medical Officer Kevin Ban to its government committee.
Covid vaccines, which boosted Walgreens’ gross sales and foot site visitors, have fallen off considerably. In the fourth quarter, the pharmacy chain administered 2.9 million vaccinations. That’s a decline from 4.7 million vaccines in its fiscal third quarter, and a pointy drop from the 15.6 million vaccines within the first quarter and the 11.8 million within the second quarter.
Sales in Walgreens’ retail and pharmacy division within the U.S. decreased by 7.2% to $26.7 billion within the fourth quarter in contrast with the year-ago interval. Comparable gross sales rose 1.6%, nonetheless.
Comparable prescriptions, excluding immunizations, have been roughly flat with the year-ago interval. Prescription quantity acquired a raise from drugs wanted for seasonal diseases and refills of upkeep drugs, however have been damage by decreased retailer hours because of staffing shortages, Kehoe mentioned on the investor name.
Its worldwide enterprise took an enormous hit from foreign money headwinds. It had fourth-quarter gross sales of $5.1 billion, a drop of 6.6% from the year-ago interval. That included a 13.3% hostile foreign money affect.
As prospects come again to shops, Walgreens additionally mentioned it’s investing in its workforce to return to regular working hours. However, it has continued to see some modifications in procuring habits. Its U.S. digital gross sales development grew 14% within the fourth quarter, on high of an 82% enhance within the year-ago interval.
As of Wednesday’s shut, Walgreens shares are down practically 39% thus far this yr. That trails behind the S&P 500, which has fallen about 25%. Shares of Walgreens closed Wednesday at $31.94, down about 2%.
Read the corporate’s earnings launch right here.