Walgreens on Thursday reported Third-quarter earnings fell wanting 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.”
Following the discharge of the outcomes, Walgreens shares fell greater than 8% in premarket trading on Thursday.
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 scale back costs after a turbulent last 12 months 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.
“75% of our deals today are responsible for 100% 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 in comparison with Wall Street expectations, based on an LSEG analyst survey:
- 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 12 months.
The company reported net income of $344 million, or 40 cents per share, for the quarter. During the identical period last 12 months, 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 12 months. The company has not provided such guidance since October, when it expected revenue of $141 billion to $145 billion.
Strong development within the healthcare sector
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 12 months.
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 throughout the period, driven by growth inside existing partnerships.
Specialty pharmacies focus on shelling out medications with special handling, storage and distribution requirements, often for patients with complex conditions akin 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 throughout 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 concerning the company's investment in VillageMD.
Walgreens' US pharmacy division generated sales of $28.5 billion within the third quarter of the fiscal 12 months, a rise of two.3 percent over the identical period last 12 months. Analysts had expected sales of $28.34 billion, in keeping with 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 because of 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 12 months, because of price increases for brand-name drugs and the rise in prescribed drugs.
The total variety of prescriptions filled throughout the quarter, including vaccines, was 306.4 million, a rise of 0.5% over the identical period last 12 months.
Retail sales fell 4% within the quarter in comparison with the identical quarter last 12 months 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 12 months.
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 great contributor to us,” he told CNBC.
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