Retail Sales Slip But Walgreens Q4 Beats Street

Walgreens Boots Alliance retail sales in the U.S. slipped in the fourth quarter even as pharmacy gained and the company beat a Wall Street estimate.

In the fourth quarter, Walgreens Boots reported a company net earnings decrease of 22.1% to $802 million with diluted net earnings per share decreasing 20% to 76 cents versus the quarter a year earlier. The decrease in earnings reflects Rite Aid-related costs, mainly merger termination fees, Walgreens Boots said.

Adjusted company net earnings advanced 18.8% to $1.39 billion, up 19.1% on a constant currency basis, compared with the prior-year quarter. Adjusted diluted net earnings per share advanced $1.31, up 22.4% on an actual and a constant currency basis, versus the previous-year quarter. Adjusted diluted net earnings per share topped a MarketBeat-published analyst average estimate of $1.21.

Sales increased 5.3% to $30.15 billion versus the year-before quarter, and gained 6.4% on a constant currency basis compared with the prior-year period. Operating income decreased 2.3% in the quarter to $1.11 billion but gained 21.2% to $1.88 billion on an adjusted basis versus the fiscal 2016 quarter, up 22.3% on a constant currency basis.

Fourth quarter retail pharmacy U.S. sales increased 7.5% to $22.3 billion, while comparable store sales increased 3.1% versus the quarter a year earlier. Comparable pharmacy sales increased 5.6% while comparable retail sales deceased 2.1% in the quarter year over year, partly due to changes in promotional plans. Growth in the beauty and in the health and wellness categories partly offset declines in the consumables, general merchandise and personal care categories, noted Walgreens.

Overall, for the fiscal year ended August 31, Walgreens Boots Alliance posted a company net earnings decrease of 2.3% to $4.1 billion with diluted net earnings per share decreasing 1% to $3.78 versus the year earlier. The earnings decrease primarily reflect Rite Aid-related costs including fees associated with the termination of the merger agreement between the two retailers.

Adjusted company net earnings gained 9.9% to $5.5 billion, up 11.6% on a constant currency basis, compared with the prior year. Adjusted diluted net earnings per share advanced 11.1% to $5.10, up 12.9% on a constant currency basis, versus the previous year.

Sales in the full fiscal year increased 0.7% to $118.21 billion versus the year before, and gained 3.3% on a constant currency basis compared with the prior year.

In terms of the company’s recent purchase of Rite Aid stores, Walgreens expects to complete integration of the acquired stores and related assets within the next three years, at an estimated cost of approximately $750 million, which will be reported as acquisition-related costs. In addition, the company plans to spend approximately $500 million of capital on store conversions and related activities.