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Walgreens (WBA) Q3 2022 earnings

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Walgreens Boots Alliance on Thursday said its quarterly sales declined and profits got hit by waning Covid-19 vaccination demand, heavy investments in its health-care business and an opioid settlement with Florida.

Shares closed the day at $37.90, down 7.27%.

The pharmacy chain stood by its full-year forecast, saying it expects adjusted earnings per share to grow by the low single digits. It pointed to rebounding store traffic and more online traffic. And it said investing in health care, reminiscent of opening doctor offices at stores, can pay off in the longer term.

With inflation hitting consumers’ wallets, CEO Roz Brewer said Walgreens is working with suppliers to be sure it has lower prices than competitors. She said Walgreens has historically seen stable prescription trends in an economic downturn.

“There is a shift in calculus because of food and fuel inflation, but health and wellness will all the time be a priority,” she said on a call with analysts.

Plus, the corporate’s drugstores’ locations — that are a brief walk, bus ride or drive from many shoppers — give Walgreens an edge as gas costs more, she said.

Here’s what the corporate reported compared with what analysts were expecting for the three-month period ended May 31, based on Refinitiv data:

  • Earnings per share: 96 cents adjusted vs. 92 cents expected
  • Revenue: $32.6 billion vs. $32.06 billion expected

Within the quarter, net income fell to $289 million, or 33 cents per share, from $1.2 billion, or $1.38 per share, a yr earlier. The sharp decline reflected a $683 million charge related to its opioid settlement with the state of Florida, a decline in U.S. pharmacy sales because it lapped a high volume of Covid vaccinations a yr ago and investments in its expanding health-care business.

Excluding items, the corporate earned 96 cents per share, exceeding the 92 cents expected by analysts surveyed by Refinitiv.

Sales decreased to $32.6 billion from $34.03 billion a yr earlier. Analysts were expecting $32.06 billion.

Walgreens has increased sales in the course of the pandemic as customers turned to its stores for Covid vaccines and tests. That demand is fading, pushing the corporate to drive growth in other ways.

The corporate administered 4.7 million vaccines in its fiscal third quarter, a pointy drop from the 15.6 million vaccines in the primary quarter and the 11.8 million within the second quarter.

But Global Chief Financial Officer James Kehoe said Walgreens now expects to manage 35 million Covid vaccinations this yr, compared with 31 million it previously anticipated.

That is barely higher than the 34.6 million vaccinations it administered last fiscal yr, when vaccines were limited because they were being delivered first to nursing homes and long-term care facilities.

At the same time as Walgreens faces other challenges including high inflation, Kehoe said Covid stays the most important unknown that may shape the pharmacy’s performance.

Health care has develop into a serious push, with Walgreens striking a cope with VillageMD to open tons of of doctor offices at its stores. More stores are also getting Health Corners, spaces staffed by nurses and pharmacists who can seek the advice of with patients and help them manage chronic conditions.

Walgreens has expanded online options, reminiscent of curbside pickup and delivery, to try to maintain customers from buying toothpaste, soap and other items from online players like Amazon. The corporate said its digital options rose 25% from a yr ago, on top of 95% growth within the year-earlier period. The expansion was fueled by 2.8 million same-day pickup orders, the corporate said.

Within the U.S. and the U.K., sales in stores picked up as consumers got out and about again. Same-store sales for retail within the U.S., which incorporates front-of-store items like shampoo, toothpaste and more, rose 2.4%, excluding tobacco. That got a lift from the sale of at-home Covid tests and cough, cold and flu medications.

Within the pharmacy division, same-store sales within the U.S. increased 2% compared with the year-earlier period — but total prescriptions dropped. That division includes vaccinations.

Within the U.K, same-store sales for retail jumped 24% at Boots — largely reflecting the low sales and fewer store visits within the prior yr. Same-store pharmacy sales were roughly flat, dropping 0.4%.

Earlier this week, Walgreens said it might halt plans to sell its U.K.-based Boots business. The corporate said in January that it was looking into strategic options for that division, including a possible sale.

Brewer said Thursday that the corporate spoke to several parties fascinated with the potential sale of Boots. But she said the corporate decided to carry on to the chain as global markets conditions modified.

As of Wednesday, Walgreens shares were down about 22% to this point this yr. Shares closed at $40.87, bringing the corporate’s market value to $35.3 billion.

Read the corporate’s earnings release here.

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