Walgreens (WBA) earnings Q3 2024

Shares of Walgreens plunged greater than 20% on Thursday after the corporate reported Third-quarter earnings fell in need of expectations and the corporate reduced its full-year adjusted earnings outlook, citing a “difficult” environment for pharmacies and U.S. consumers.

The pharmacy giant now expects adjusted earnings of $2.80 to $2.95 per share for fiscal 2024. In comparison, the corporate’s previous forecast was $3.20 to $3.35 per share.

“We expected consumers to get a little stronger in the second half of the year,” but “that’s not the case,” Walgreens CEO Tim Wentworth told CNBC.

He added: “Consumers are completely baffled by the absolute prices of things, and the fact that some of them may not go up does not change their resistance to current prices. So we’ve had to be really vigilant, especially on non-essential things.”

Still, Walgreens beat revenue estimates for the quarter because of strong performance in its healthcare division, which the corporate views as critical to its ongoing transformation from a significant drugstore chain to a significant healthcare company.

The results come as Walgreens works to cut back costs after a turbulent last yr marked by low pharmacy reimbursement rates of interest, weaker demand for Covid products and a difficult macroeconomic environment.

The company said Friday that, amongst other ongoing cost-cutting measures, it’s simplifying its U.S. health care portfolio and finalizing plans to shut low-revenue U.S. stores over several years.

“Seventy-five percent of our deals today account for 100 percent of our profitability,” Wentworth said. “That means we’re going to look closely at the others and close a certain number of them.”

Here’s what Walgreens reported for the three-month period ended May 31 in comparison with Wall Street expectations, based on a survey of analysts conducted by LSEG:

• Earnings per share: 63 cents adjusted in comparison with 68 cents expected
• Revenue: $36.4 billion in comparison with expected $35.94 billion

Walgreens reported revenue of $36.4 billion for the quarter, up 2.6% from the identical period last yr.

The company reported net income of $344 million, or 40 cents per share, for the quarter. During the identical period last yr, net income was $118 million, or 14 cents per share.

Excluding certain items, adjusted earnings for the quarter were 63 cents per share.

Walgreens didn’t provide a brand new revenue forecast for the fiscal yr. The company has not provided such guidance since October, when it expected sales of $141 billion to $145 billion.

Walgreens reported growth in all three business areas within the third quarter. However, the corporate’s U.S. healthcare division deserves special mention, with sales increasing 7.6 percent in comparison with the identical period last yr.

The segment’s revenue amounted to $2.13 billion. According to FactSet estimates, analysts had expected revenue of $2.08 billion.

The company said the upper sales were driven by primary care physician VillageMD and specialty pharmacy company Shields Health Solutions. Shields saw a 24% jump in sales through the period, driven by growth inside existing partnerships.

Specialty pharmacies concentrate on shelling out medications with special handling, storage and distribution requirements, often for patients with complex conditions corresponding to cancer and rheumatoid arthritis.

These results come one quarter after Walgreens reported a big net loss because it took a big charge of nearly $6 billion related to the decline in value of its investment in DorfMDThe company now plans to shut 160 VillageMD clinics, executives announced through the company’s second-quarter earnings call in March.

“We are working with their management team to ultimately remain an investor but significantly reduce our investment and gain some liquidity so that we can reinvest in the pharmacy business, which is our future,” Wentworth told CNBC in regards to the company’s investment in VillageMD.

Walgreens’ US pharmacy division generated sales of $28.5 billion within the third quarter of the fiscal yr, a rise of two.3 percent over the identical period last yr. Analysts had expected sales of $28.34 billion, based on FactSet estimates.

This segment operates greater than 8,000 drugstores within the United States that sell prescription and nonprescription drugs, in addition to health and wellness, beauty, personal care and dietary products.

The company said the revenue growth was entirely attributable to comparable pharmacy sales and was partially offset by a decrease in retail revenue.

Walgreens said pharmacy sales increased 4.4% within the quarter and comparable pharmacy sales increased 5.7% in comparison with the identical period last yr, attributable to price increases for brand-name drugs and the rise in pharmaceuticals.

The total variety of prescriptions filled through the quarter, including vaccines, was 306.4 million, a rise of 0.5% over the identical period last yr.

Retail sales fell 4% within the quarter in comparison with the identical quarter last yr and comparable retail sales fell 2.3%. The company cited a “difficult” retail environment, amongst other things.

Walgreens’ international segment, which operates greater than 3,000 retail stores abroad, reported third-quarter sales of $5.73 billion, up 2.8% from the identical period last yr.

The company said sales of its UK-based drugstore chain Boots rose 1.6 percent.

Walgreens has reportedly scrapped 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.

However, Wentworth said Walgreens has no plans to sell the chain.

“There is no doubt at this point that Boots is a major backer for us,” he told CNBC.

— CNBC’s Bertha Coombs contributed to this report.