Walgreens Q1 Beats Street As It Divests Wholesale Pharmacy

Walgreens Boots Alliance earnings slipped In the first quarter as the company divested its pharmaceutical wholesale business and boosted its investment in VillageMD while accelerating the rollout of full-service primary care clinics in stores.

AmerisourceBergen is acquiring Alliance Healthcare Businesses from Walgreens for $6.5 billion. The move will result in Walgreens increasing its focus on growing Its core retail pharmacy businesses. At the same time, Walgreens stated, it is extending and expanding its commercial agreements with AmerisourceBergen in the United States to push incremental growth. The companies are extending their U.S. distribution agreement by three years until 2029 and expanding it to include a commitment to pursue additional sourcing and distribution opportunities.

In the first quarter, company net loss was $308 million, or 36 cents per diluted share, versus net earnings of $845 million, or 95 cents per diluted share, in the year-previous period.

Adjusted company net earnings were $1.05 billion, or $1.22 per diluted share, versus $1.22 billion, or $1.37 per diluted share, in the quarter a year before.

Walgreens adjusted earnings per diluted share topped a MarketBeat-published analyst consensus estimate of $1.03.

Walgreens first quarter sales increased 5.7%, or 5.2% on a constant currency basis, to $36.31 billion versus the year-earlier period, the company reported. Operating loss was $440 million versus operating income of $1.01 billion in the quarter a year past.

In the Retail Pharmacy USA business, first quarter sales increased 3.9% year over year to $27.2 billion, including the effect of previously announced store optimization programs, Walgreens indicated. Comparable sales increased 3.7% from the quarter a year prior reflecting a 5% increase in comparable pharmacy sales and a 0.4% gain in comparable retail sales.

Walgreens pointed out that estimated adverse COVID-19 impact on comparable sales in the period included lower foot traffic in stores, weak retail cough, cold and flu sales, lower seasonal flu scripts, and reduced new-to-therapy scripts. Retail comps include a 13.1% decrease in beauty category sales and a 1.3% decrease in personal care category sales partially offset by a 4.1% increase in health and wellness sales.

As the company announced its financial results, executive vice chairman and CEO Stefano Pessina said, “Our first quarter results exceeded expectations as we continue to deliver on our strategic priorities. We have taken a major step forward in our transformation. We are divesting our pharmaceutical wholesale business with plans to use the proceeds to accelerate our investments in healthcare. While the business environment remains challenging, we are rising to the occasion with agility and discipline and we are confident in our outlook for adjusted EPS for the fiscal year. Our role in the healthcare system has never been more important, as the communities we serve continue to turn to our trusted brands and expert pharmacists. I am so proud of our teams and the historic and critical role they are playing to help the world emerge from the pandemic, administering COVID-19 vaccinations to frontline healthcare workers and vulnerable members of our society.”