Shares of Walgreens took a significant hit, falling nearly 20%, following disappointing financial results for the fiscal third quarter. The company reported lower-than-expected earnings and revised its full-year adjusted profit outlook downwards. Despite a strong performance in its healthcare segment, the retail giant is facing challenges in the current environment for pharmacies and U.S. consumers.
Factors Contributing to the Decline
Walgreens attributed the underperformance to the “challenging” environment for pharmacies and consumers in the U.S. Walgreens CEO Tim Wentworth expressed surprise at the lack of increase in consumer spending in the second half of the year, adding that consumers are increasingly sensitive to pricing of goods and services. The company is now focusing on cost-cutting measures and narrowing down its U.S. healthcare portfolio by closing underperforming stores.
The company’s earnings per share for the quarter were 63 cents, falling short of the 68 cents expected by Wall Street analysts. However, revenue for the quarter exceeded expectations, coming in at $36.4 billion compared to the anticipated $35.94 billion. Walgreens’ net income for the quarter was $344 million, up from $118 million in the same period last year.
Walgreens did not provide a new revenue forecast for the fiscal year, having last issued guidance in October. The company reported growth across its business divisions, with a strong performance from its U.S. healthcare unit where sales increased by 7.6% compared to the previous year. The company attributed the growth to partnerships with primary care provider VillageMD and specialty pharmacy company, Shields Health Solutions.
Walgreens’ U.S. retail pharmacy segment saw sales of $28.5 billion in the fiscal third quarter, an increase of 2.3% from the same period last year. The segment, which operates over 8,000 drugstores across the U.S., experienced a sales growth from comparable pharmacy sales but saw a decline in retail revenue. Walgreens reported that total prescriptions filled in the quarter, including vaccines, were up by 0.5% compared to last year.
Walgreens’ international segment, with over 3,000 retail stores abroad, posted sales of $5.73 billion in the fiscal third quarter. The company’s U.K.-based drugstore chain, Boots, experienced a sales growth of 1.6%. While there were reports of a potential IPO for Boots being scrapped, Walgreens has denied any plans to sell the chain. The company is aiming to retain Boots as a major contributor to its overall business.
Long-Term Strategies and Outlook
Despite the challenges faced by Walgreens in the current economic environment, the company is forging ahead with its long-term transformation strategy. By simplifying its U.S. healthcare portfolio, focusing on cost-cutting measures, and investing in key growth areas, Walgreens aims to overcome the obstacles and emerge as a stronger and more resilient healthcare company.
Walgreens’ disappointing quarter results have highlighted the challenges facing the retail pharmacy giant in a tough economic environment. By addressing key issues, implementing strategic changes, and focusing on growth opportunities, Walgreens is working towards a more sustainable and successful future.