Walgreens reported fiscal earnings that fell short of expectations and slashed its full-year adjusted profit outlook due to a “challenging” environment for pharmacies and US consumers.
The company topped revenue estimates for the quarter on strong performance in its health-care segment, as the results come as Walgreens works to slash costs by closing underperforming U.S. stores, among other efforts.
The company now expects fiscal 2024 adjusted earnings of $2.80 to $2.95 per share, compared with the company’s previous outlook of between $3.20 and $3.35 per share. Walgreens CEO Tim Wentworth noted that the consumer is absolutely stunned by the absolute prices of things, and the fact that some of them may not be inflating doesn’t actually change their resistance to the current pricing.
However, Walgreens topped revenue estimates for the quarter on strong performance in its health-care segment. The company views that business division as critical to its ongoing push to transform from a major drugstore chain into a large health-care company.
The results come as Walgreens works to slash costs after a rocky last year marked by low pharmacy reimbursement rates, weakening demand for Covid products, and a challenging macroeconomic environment.
Walgreens did not provide a new revenue forecast for the fiscal year. The company has not offered that guidance since October, when it said it expected $141 billion to $145 billion in sales.
Walgreens reported growth across its three business divisions in the fiscal third quarter. But the company’s U.S. health-care unit stood out, as sales jumped 7.6% compared with the same period a year ago. Revenue for the segment came in at $2.13 billion. Analysts had expected sales of $2.08 billion.
The higher sales reflect primary care provider VillageMD and specialty pharmacy company, Shields Health Solutions. Shields saw sales jump 24% during the period, driven by growth within existing partnerships. Specialty pharmacies are designed to deliver medications with unique handling, storage, and distribution requirements, often for patients with complex conditions such as cancer and rheumatoid arthritis.
Walgreens’ retail pharmacy segment generated $28.5 billion in sales in the fiscal third quarter, an increase of 2.3% from the same period last year. The company said that sales growth came entirely from comparable pharmacy sales and was partially offset by a decline in retail revenue.
Retail sales for the quarter fell 4% from the prior-year quarter, and comparable retail sales declined 2.3%. The company pointed to a “challenging” retail environment, among other factors. Walgreens’ international segment, which operates more than 3,000 retail stores abroad, posted $5.73 billion in sales in the fiscal third quarter.
Walgreens reportedly scrapped plans for a potential initial public offering of the subsidiary and is in informal talks with potential buyers, including private equity firms. However, Wentworth said Walgreens has no plans to sell the chain.
Tags earnings health care Walgreens
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