Walgreens holds steady despite U.S. store comp decline
Walgreens on Thursday reported that first quarter sales rose 9.9% (or 11.4% in constant currency) to $33.8 billion, including a benefit from acquired Rite Aid stores.
Retail sales in the U.S. rose 6% year over year in the quarter, but store comps fell 3.2%, primarily due to a continued de-emphasis of select products including tobacco, according to a company press release.
Net earnings attributable to Walgreens Boots Alliance rose 36.8% to $1.1 billion year over year as adjusted net earnings rose 7% percent to $1.4 billion, the company also said. Operating income rose 6.1% year over year to $1.4 billion, as adjusted operating income fell 4.1% to $1.7 billion.
In his statement on Thursday, Walgreens Boots Alliance CEO Stefano Pessina called out "solid results in the U.S." and said that the drugstore company continues to work to "transform" its business.
That includes several partnerships, including a new tie-up with Alphabet's medical tech unit Verily for "multiple projects ... aimed at improving health outcomes for patients with chronic conditions" while lowering costs, according to a press release emailed to Retail Dive. The project will leverage technology that "may include sensors and software to help prevent, manage, screen and diagnose disease" with a goal of scaling through Walgreens retail locations. First on the list is a diabetes management program, the companies said.
That plus earlier collaborations with Kroger, FedEx and health insurer Humana helped assuage some investors, who had expected better results. "While the quarter didn't achieve our higher expectations, the quarter was closer to consensus and guidance was maintained," Wells Fargo Senior Analyst Peter Costa said in comments emailed to Retail Dive. "Furthermore, WBA continued to make progress with more partnerships that could eventually add shareholder value."
The company maintained its guidance of adjusted earnings-per-share growth of 7% to 12% growth in fiscal year 2019, and announced that it aims to trim costs by more than $1 billion each year by the end of the third year of the plan.
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