Walgreens Boots Alliance Q1 sales rose 10% year over year to $36.7 billion. The company said it slashed its quarterly dividend payment by nearly half.
U.S. retail sales were a drag in the period, down 6.1%, with comparable retail sales down 5%. That included a 90 basis point hit from lower seasonal sales, a 160 basis point hit from a weaker cold and flu season, and a 60 basis point hit from Thanksgiving holiday store closures.
Gross margins were hurt by a “higher” but unspecified level of shrink. Net loss narrowed to $278 million, from $3.8 billion a year ago.
Walgreens is pinning its recovery hopes on cost-containment and expansion of its health care services, further indication that what many observers see as a lackluster customer experience in the front of its U.S. stores won’t be changing much.
Some analysts also saw the departure of CEO Rosalind Brewer in September as a sign that retail would take a back seat in the company’s turnaround; she has been replaced by Tim Wentworth, a former CEO of Express Scripts, the pharmacy benefit manager acquired by health insurance giant Cigna in 2018. At Cigna, he also led health services business Evernorth.
The company is starting a new year after months of upheaval. In June, the retailer said it would close 150 stores in the U.S. and 300 in the U.K., part of a cost-cutting effort that targets at least $800 million in savings in 2024, for an accumulation of $4.1 billion by then. Soon after, Chief Financial Officer James Kehoe resigned. After Wentworth’s arrival, Neal Sample, who had executive experience at Express Scripts and Northwestern Mutual, replaced Hsiao Wang as chief information officer. Chief Marketing Officer Linh Peters left the drugstore retailer as part of a round of layoffs in November. The company had already cut 10% of its workforce in May.
Walgreens’ Q1 results were in line with expectations, “reflecting disciplined execution in a challenging consumer backdrop,” Wentworth said in a statement.
"We are evaluating all strategic options to drive sustainable long-term shareholder value, focusing on swift actions to right-size costs and increase cash flow, with a balanced approach to capital allocation priorities,” he said, adding, “We are proud to be a trusted and independent partner of choice, delivering healthcare to millions of people. And, we will leverage our local, convenient presence to engage with patients and help payors, providers, and pharma companies also achieve better health outcomes at an affordable cost."
The performance of its U.S. stores stands in contrast to its U.K. Boots locations, where retail comps rose 9.8% year over year, store footfall rose 7% and its retail market share grew for the 11th straight quarter, led by beauty, per the company’s earnings presentation.