Walgreens Boots Alliance The company on Tuesday slashed its full-year profit guidance and its fiscal third-quarter results missed Wall Street expectations due to lower consumer spending and lower demand for COVID-19 vaccines and tests.
The retail pharmacy chain cut its full-year profit guidance to $4.00 to $4.05 a share, down from its previous forecast of $4.45 to $4.65 a share.
Chief Executive Rosalind Brewer told analysts on the company’s earnings call that she was disappointed by the lowered profit guidance for the year.
Weak demand for COVID-19 vaccines and a drop in consumer spending are likely to persist into next year, Brewer said. She said the company is closing, watching the end of fiscal stimulus and the resumption of student loan payments as potential headwinds.
“Our customers are feeling the pinch of rising inflation and interest rates, reduced SNAP benefits and rebates, and an uncertain economic outlook,” Brewer said. “They are scaling back discretionary and seasonal spending and are responding strongly to promotions. “
Brewer said she increased Walgreens’ cost-cutting plan to $4.1 billion, including $800 million in savings in fiscal 2024. The company is also working to improve the profitability of its healthcare unit, she said.
Brewer said that while she wasn’t happy with Tuesday’s results, Walgreens has the right strategy to drive future growth.
Shares of Walgreens fell about 9% following the news.
Here’s How Walgreens Stands in Its Business third quarter That compares to what Wall Street expected, based on analyst forecasts polled by Refinitiv:
- income: Adjusted $1.00 a share, compared with expectations for $1.07.
- income: $35.42 billion, compared with expectations for $34.24 billion.
It was the first time since July 2020 that Walgreens missed analysts’ earnings expectations.
But the company topped revenue expectations and delivered sales growth, with sales of $35.4 billion in the quarter, up 8.6% from the $32.6 billion in revenue a year earlier, thanks to growth in retail pharmacy and health care.
Walgreens reported net income of $118 million, or 14 cents a share, on an unadjusted basis for the quarter, down 59% from the $289 million in revenue the company reported a year earlier. The company said the decline was primarily due to lower operating income.
Walgreens’ U.S. retail pharmacy unit sold about $28 billion in the quarter, up 4.4% from a year earlier. Comparable sales at individual locations rose 7%.
Walgreens pharmacy sales also rose 6.3% from a year earlier, with comparable sales up nearly 10% thanks to higher prices for brand-name drugs.
Total prescriptions for the quarter, including immunizations, rose 0.1% to a total of 305 million prescriptions. The number of COVID-19 vaccines administered during that period plummeted 83% to 800,000 doses, down from 4.7 million doses during the same period last year.
“We were looking at COVID-19 as a wildcard going into the quarter, and unfortunately, patient willingness to get vaccinated is low,” Brewer said.
Walgreens expects to administer 9 million to 10 million doses of the COVID-19 vaccine by 2024, in line with a typical flu season, compared with 12.5 million doses expected in 2023, Brewer said.
Sales at Walgreens’ US health care unit were $2 billion, up $1.4 billion from a year earlier.
Revenue at primary care provider VillageMD, which includes urgent care provider Summit Health, rose 22%. Walgreens home health care provider CareCentrix saw sales rise 15% thanks to additional services.
Still, the health care segment posted a loss before interest, taxes, depreciation and amortization of $113 million for the quarter due to the expansion of VillageMD and fewer patient visits at Summit Health’s CityMD urgent care clinic due to a weaker respiratory virus season.
“While we are confident in the scope and scale of our healthcare business, we are disappointed by the pace of the road to profitability,” John Driscoll, president of Walgreens’ healthcare business, told analysts on the company’s Tuesday conference call. .”
“We are taking immediate action to improve profitability,” Driscoll said. “We expect this year to remain a transition year as we take actions to create value and improve profitability.”
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