On Thursday, Walgreens Boots Alliance (NASDAQ: WBA) shares plummeted to their lowest level since 1997. The major pharmacy chain and healthcare provider missed profit estimates, cut its guidance, and announced significant store closures due to weak consumer demand.
Walgreens Boots Alliance (NASDAQ: WBA) reported third-quarter adjusted earnings per share (EPS) of $0.63, falling short of forecasts. However, revenue exceeded expectations, rising 2.6% year-over-year to $36.4 billion. The company also lowered its fiscal 2024 adjusted earnings forecast to $2.80 to $2.95 per share, compared to the previous projection of $3.20 to $3.35 per share.
CEO Tim Wentworth: “We Continue to Face a Difficult Operating Environment”
According to Mr. Wentworth, despite strong performances in both their International and US Healthcare segments, the company continues to face a challenging operating environment. Persistent pressures on the U.S. consumer and recent marketplace dynamics have eroded their pharmacy margins.
We are addressing critical issues with urgency and working to unlock opportunities for growth. Many of these actions will take time, but I am confident that we have the right team and the right strategy to lead a business turnaround for Walgreens that our customers and patients need.”
Tim Wentworth
Walgreens Boots Alliance (NASDAQ: WBA) reported quarterly sales of $36.4 billion, a 2.6% increase compared to the same period last year. The company also reported a net income of $344 million in the third quarter, up from $118 million in the same period last year. This indicates an increase of $226 million reflecting a higher operating income.
Healthcare Segment Demonstrates Resilient Performance
Walgreens Boots Alliance (NASDAQ: WBA) reported growth across its three business divisions in the fiscal third quarter, with its U.S. healthcare unit standing out notably with a 7.6% sales increase compared to the previous year.
The company’s Healthcare segment generated $2.13 billion in revenue, driven by the contributions of primary care provider VillageMD and specialty pharmacy company Shields Health Solutions. Shields experienced a significant 24% sales increase, fueled by growth within its current partnerships.
In the fiscal third quarter, Walgreens Boots Alliance (NASDAQ: WBA)’s U.S. retail pharmacy segment achieved sales of $28.5 billion, marking a 2.3% increase from the previous year. Analysts, as per estimates compiled by FactSet, had anticipated sales of around $28.34 billion.
Operating over 8,000 drugstores nationwide, this segment of Walgreens Boots Alliance (NASDAQ: WBA) sells a range of products including prescription and nonprescription drugs, health and wellness items, beauty products, personal care items, and food products.
Additionally, Walgreens Boots Alliance (NASDAQ: WBA) also noted that pharmacy sales in the quarter increased by 4.4%, with comparable pharmacy sales rising 5.7% compared to the previous year, driven by price inflation in brand medications and growth in prescriptions.
In the same period, the company reported a 4% decline in retail sales compared to the prior year, with comparable retail sales dropping 2.3%. The company attributed this decline to a “challenging” retail environment and other factors.
Meanwhile, Walgreens Boots Alliance (NASDAQ: WBA)’s International segment, which oversees more than 3,000 retail stores globally, recorded sales of $5.73 billion for the quarter, marking a 2.8% increase from the previous year. Sales from its U.K.-based drugstore chain, Boots, specifically grew by 1.6%, according to the company.
Walgreens Boots Alliance Plans Store Closures and Healthcare Portfolio Streamlining
Walgreens has announced updates to its strategic review, emphasizing efforts to “simplify and streamline the U.S. Healthcare portfolio” while intending to shutter “certain underperforming U.S. stores.” According to Wentworth, a “significant percentage” of these unprofitable stores could close within the coming years, as reported by The Wall Street Journal.
As of 2:17 p.m. ET on Thursday, shares of Walgreens Boots Alliance (NASDAQ: WBA) plummeted over 25% to $11.72, marking a decline of more than 50% year-to-date.
