Walgreens slashes revenue steerage, citing 'difficult' surroundings for customers and pharmacies

Walgreens on Thursday reported fiscal third-quarter earnings that fell in need of expectations and slashed its full-year adjusted revenue outlook, citing a “difficult” surroundings for pharmacies and U.S. customers.

The retail pharmacy large now expects fiscal 2024 adjusted earnings of $2.80 to $2.95 per share. That compares with the corporate’s previous outlook of between $3.20 and $3.35 per share.

“‘We assumed.. within the second half that the patron would get considerably stronger” however “that isn’t the case,” Walgreens CEO Tim Wentworth advised CNBC. 

He added that “the patron is completely shocked by absolutely the costs of issues, and the truth that a few of them might not be inflating would not really change their resistance to the present pricing. So we have needed to get actually eager, notably in discretionary issues.” 

Shares of Walgreens fell greater than 5% in premarket buying and selling Thursday following the outcomes.

Nonetheless, Walgreens topped income estimates for the quarter on robust efficiency in its health-care phase. The corporate views that enterprise division as important to its ongoing push to rework from a serious drugstore chain into a big health-care firm. 

The outcomes come as Walgreens works to slash prices after a rocky final yr marked by low pharmacy reimbursement charges, weakening demand for Covid merchandise and a difficult macroeconomic surroundings. 

The corporate on Friday stated it’s simplifying its U.S. health-care portfolio and finalizing plans to shut underperforming U.S. shops over a number of years, amongst different ongoing cost-cutting efforts. 

“75% of our shops drive 100% of our profitability as we speak,” Wentworth stated. “What which means is the others we take a tough have a look at, we’re going to finalize a quantity that we’ll shut…”

This is what Walgreens reported in contrast with what Wall Road was anticipating, based mostly on a survey of analysts by LSEG:

• Earnings per share: 63 cents adjusted vs. 68 cents anticipated
• Income: $36.4 billion vs. $35.94 billion anticipated

Walgreens booked gross sales of $36.4 billion for the quarter, up 2.6% from the identical interval a yr in the past. 

The corporate reported a internet revenue of $344 million, or 40 cents per share, for the quarter. That compares with a internet revenue of $118 million, or 14 cents per share, for a similar interval a yr in the past.

Excluding sure objects, adjusted earnings had been 63 cents per share for the quarter. 

Walgreens didn’t present a brand new income forecast for the fiscal yr. The corporate has not supplied that steerage since October, when it stated it anticipated $141 billion to $145 billion in gross sales. 

These outcomes come one quarter after Walgreens posted a steep internet loss because it recorded a hefty practically $6 billion cost associated to the decline in worth of its funding in VillageMD. The corporate now plans to shutter 160 VillageMD clinics, executives introduced throughout the firm’s fiscal second-quarter earnings name in March. 

“We’re working with their administration workforce to finally nonetheless be an investor, however meaningfully cut back our funding in addition to acquire some liquidity in order that we will make investments again within the retail pharmacy enterprise that represents our future,” Wentworth advised CNBC of the corporate’s funding in VillageMD.

Walgreens’ U.S. retail pharmacy phase generated $28.5 billion in gross sales within the fiscal third quarter, a rise of two.3% from the identical interval final yr. Analysts had anticipated gross sales of $28.34 billion, based on estimates compiled by FactSet. 

That phase operates greater than 8,000 drugstores throughout the U.S., which promote prescription and nonprescription medicine in addition to well being and wellness, magnificence, private care, and meals merchandise.  

The corporate stated that gross sales progress got here solely from comparable pharmacy gross sales and partially offset by a decline in retail income.

Walgreens stated pharmacy gross sales for the quarter rose 4.4% and comparable pharmacy gross sales elevated 5.7% in comparison with the year-earlier interval attributable to value inflation in model medicines and prescription progress. 

Complete prescriptions crammed within the quarter together with vaccines totaled 306.4 million, a 0.5% enhance from the identical interval a yr in the past. 

Retail gross sales for the quarter fell 4% from the prior-year quarter, and comparable retail gross sales declined 2.3%. The corporate pointed to a “difficult” retail surroundings, amongst different elements. 

Walgreens’ worldwide phase, which operates greater than 3,000 retail shops overseas, posted $5.73 billion in gross sales within the fiscal third quarter. That is a rise of two.8% from the year-ago interval.

The corporate stated gross sales from its U.Okay.-based drugstore chain, Boots, grew 1.6%.

Walgreens reportedly scrapped plans for a possible preliminary public providing of the subsidiary and is in casual talks with potential patrons, together with non-public fairness companies, Bloomberg Information reported earlier this month.

However Wentworth stated Walgreens has no plans to promote the chain.

“Proper now, there isn’t any query boots is a serious contributor to us,” he advised CNBC.

— CNBC’s Bertha Coombs contributed to this report.