An individual drives past a Walgreens truck owned by Walgreens Boots Alliance, Inc. on November 26, 2021 in Manhattan, New York City, United States.
Andrew Kelly | Reuters
Walgreens on Thursday reported on the second fiscal quarter Sales beat Wall Street expectations but lowered the highest end of the adjusted full 12 months Earnings outlook partly resulting from a “challenging” retail environment within the US
The company also posted a big net loss within the quarter because it took a big charge of nearly $6 billion resulting from the decline in the worth of its investment in a primary care provider VillageMD. Walgreens has closed 140 VillageMD clinics amid the corporate’s financial problems, which it sees as crucial to its ongoing efforts to remodel itself from a serious drugstore chain into a serious health care company.
But Walgreens doesn’t consider the VillageMD indictment “will have a material impact on our financial condition or our ability to invest across businesses in the future,” Walgreens global chief financial officer Manmohan Mahajan said during a conference call Thursday.
The results come as Walgreens’ latest CEO Tim Wentworth is working to chop costs and steer the corporate out of troubled territory with a spread of expenses latest managers. Shares of Walgreens fell 30% last 12 months as the corporate faced weaker demand for Covid products, low reimbursement rates for pharmacies, an uncertain push into healthcare and a difficult macroeconomic environment.
In a press release Thursday, the corporate said it’s confident it would achieve its goal of $1 billion in fiscal 2024 savings through its ongoing cost-cutting program. Walgreens has, amongst other things, laid off employees, closed unprofitable stores and used artificial intelligence to make its supply chain more efficient.
Here’s what Walgreens reported for the quarter in comparison with Wall Street’s expectations, based on an analyst survey from LSEG, formerly referred to as Refinitiv:
- Earnings per share: $1.20 adjusted versus 82 cents expected
- Revenue: $37.05 billion versus expected $35.86 billion
Walgreens cut its fiscal 2024 adjusted earnings forecast to $3.20 to $3.35 per share. This compares to the corporate’s previous guidance of $3.20 to $3.50 per share. Analysts surveyed by LSEG expect full-year adjusted earnings of $3.24 per share.
Walgreens said the brand new forecast reflects hurdles facing U.S. retailers and an early termination of its sales leaseback program. This also includes lower returns from Walgreens’ forward sale of shares of drug retailer Cencora, formerly referred to as AmerisourceBergen.
The company said stronger performance in its pharmacy services segment and a lower adjusted effective tax rate helped offset aspects weighing on its earnings.
But Mahajan said Walgreens expects the present economic backdrop to “continue to negatively impact our U.S. retail sales in the near term.”
Wentworth noted on the decision that the corporate is “exploring innovative ways to increase profitability and growth” in its retail pharmacy division, reminiscent of through latest pharmacy reimbursement models.
The company didn’t provide a brand new sales forecast for the fiscal 12 months. Walgreens hasn’t made that forecast since October, when it expected sales of $141 billion to $145 billion.
The company reported a net lack of $5.91 billion, or $6.85 per share, for the quarter. By comparison, net income was $703 million, or 81 cents per share, in the identical period last 12 months. A
Excluding certain items, including VillageMD’s $5.8 billion non-cash charge, adjusted earnings per share for the quarter were $1.20.
The company reported revenue of $37.05 billion within the quarter, up about 6% from the identical period last 12 months.
Walgreens is experiencing growth across all business areas
The company said this increase reflected revenue growth across its three business segments. But Walgreens’ U.S. healthcare division stood out as sales rose about 33% within the fiscal second quarter compared with the identical period last 12 months.
The segment’s revenue was $2.18 billion.
The company said the upper sales reflected VillageMD’s acquisition of multi-specialty care provider Summit Health and growth across all businesses in that segment on a professional forma basis.
VillageMD’s revenue increased 20% due partially to same-clinic growth. Sales on the segment’s specialty pharmacy business, Shields Health Solutions, increased 13% resulting from latest contracts and expansions of existing partnerships.
Specialty pharmacies are designed to provide medications with unique handling, storage and distribution requirements, often for patients with complex diseases reminiscent of cancer and rheumatoid arthritis.
Walgreens and VillageMD
Source: Walgreens
Meanwhile, Walgreens’ US retail pharmacy segment reported revenue of $28.86 billion within the fiscal second quarter, a rise of nearly 5% from the identical period last 12 months.
This segment operates greater than 8,000 drugstores within the United States that sell prescription and over-the-counter medications, in addition to health and wellness, beauty, personal care and grocery products.
Walgreens said pharmacy sales rose 8.2% within the quarter in comparison with the identical quarter last 12 months. Comparable sales rose 8.7% resulting from price inflation in branded drugs and “strong execution” in pharmacy services, primarily driven by the corporate’s vaccine portfolio.
Total prescriptions filled within the quarter, including vaccinations, were 305.7 million, up greater than 2% from the identical period last 12 months.
Retail sales fell 4.5% within the quarter in comparison with the identical quarter last 12 months, and comparable retail sales fell 4.3%. The company cited a difficult retail environment and a weaker respiratory season, amongst other aspects.
Walgreens’ international segment, which operates greater than 3,000 retail stores overseas, posted sales of $6.02 billion within the fiscal second quarter. This is a rise of greater than 6% in comparison with the identical period last 12 months.
The company said sales at its British subsidiary Boots rose 3%.
When asked in the decision Eli LillyWentworth didn’t comment specifically on Wentworth’s latest direct-to-consumer website, which goals to expand access to its weight reduction drug Zepbound.
However, he noted that the corporate is a “natural partner” for pharmaceutical corporations that “may want to go directly to patients for a particular product where the normal supply chain, reimbursement model, etc. does not work effectively.”
As an example, Wenworth pointed to GLP-1, a brand new class of weight reduction and diabetes drugs that features Zepbound. These medications have to be taken chronically, but are expensive, which is usually a hurdle for patients in addition to medical insurance corporations and other payers.
Wentworth said Walgreens is “uniquely positioned” to distribute medications and function a “clinically aligned partner” that may also help patients navigate their treatment safely.
