Walgreens Generates Solid Q1, Launches Cost Cutting Plan

Walgreens Boots Alliance generated a solid first quarter while launching a cost management program that will look to save more than $1 billion.

Fiscal 2019 first quarter net earnings increased to $1.1 billion compared with the same quarter a year ago, while net earnings per share increased to $1.18 compared with the same quarter a year ago. Adjusted net earnings increased to $1.4 billion, compared with the same quarter a year ago. Adjusted earnings per share were $1.46, an increase of 14.1% on both a reported and constant currency basis, compared with the same quarter a year ago.

Sales in the first quarter were $33.8 billion, an increase of 9.9% from the year-ago quarter, including the benefit from acquired Rite Aid stores. The retail pharmacy U.S. division had first quarter sales of $25.7 billion, an increase of 14.4% over the year-ago quarter. Excluding the benefit from acquired Rite Aid stores, organic sales growth was 4.6% in the quarter.

Pharmacy sales increased 17.5% compared with the year-ago quarter. Comparable pharmacy sales increased 2.8%. Retail sales increased 6% in the first quarter compared with the year-ago period. Comparable retail sales were down 3.2% in the quarter, primarily due to the continued de-emphasis of select products such as tobacco, and a difficult comparison with the prior year quarter, the company said.

Stefano Pessina, executive vice chairman and CEO, Walgreens Boots Alliance, said, “We are pleased to have delivered double digit percentage growth in earnings per share in the first quarter, including solid results in the U.S. We continue to focus on and invest in transforming our business. We have made good progress on partnerships, including advancing our collaborations with Kroger, FedEx and Humana and, earlier this week, we announced an initiative with Verily to further expand our health care offering. Today we are reaffirming our fiscal 2019 guidance and announcing the launch of a new transformational cost management program, which is targeting annual cost savings of more than $1 billion by the end of the third year, to better position ourselves to meet our long-term targets.”

The company’s cost management program is targeting annual cost savings in excess of $1 billion by the end of the third year of the plan. The program includes divisional optimization initiatives, global smart spending, global smart organization and digitalization of the enterprise to transform long-term capabilities.

Divisional optimization has already started, the company said, and includes cost reduction activities in the pharmaceutical wholesale division and in the company’s retail businesses in Chile and Mexico. Additionally, the company has initiated global smart spending and smart organization programs, initially focused on the company’s U.S. retail pharmacy division, its retail business in the U.K. and its global functions.