Walgreens Boots Alliance Inc. narrowed its fiscal 2024 guidance citing a challenging retail environment, including reduced consumer spending.
Consumers are spending less on nonessential items and seeking more affordable options, Chief Financial Officer Manmohan Mahajan said on a call with investors. Mahajan also said the company saw a weaker-than-normal respiratory season.
Walgreens has been finding ways to help increase cash flow as part of a broader strategy to invest more money into its pharmacy and health-care businesses. Last quarter, Chief Executive Officer Tim Wentworth slashed the dividend almost in half, and earlier this month he announced a strategic review of the business beginning in April to set the troubled drugstore chain on a path to growth.
In a statement, Wentworth said that the company was on track to achieving $1 billion in cost savings this year.
Walgreens lowered the top end of its forecast range for full-year adjusted earnings to $3.20 to $3.35 a share. In addition to the tough retail landscape, the drugstore chain said earnings would be hurt by the sale of $992 million worth of Cencora Inc. shares in February. Its earlier outlook was $3.20 to $3.50 a share.
Shares fell 1% at 10:08 a.m. in New York. The stock has fallen 20% this year while the S&P 500 index has gained 10%.
The US health-care unit, which includes VillageMD, posted revenue of $2.2 billion for the quarter — beating analysts’ average estimate of $2 billion. The chain attributed the result to the acquisition of Summit Health by VillageMD.
But it could take time for it to reach its full potential, Edward D. Jones analyst John Boylan said in a note. “We continue to believe that the new CEO should help Walgreens return to predictable growth, but we are uncertain when that might occur,” he said, calling it “a mixed quarter” that wasn’t “entirely unexpected.”
The retail pharmacy unit posted revenue of $28.9 billion — above analysts’ estimates of $28.1 billion — driven by branded drug inflation. The drugstore chain’s international business saw sales of $6 billion — ahead of analysts’ expectations of $5.84 billion. Walgreens abandoned plans for a $6 billion-plus sale of its international Boots chain in 2022 after failing to get the desired value, but a potential sale is back on the table, Bloomberg News reported in December.
Excluding a $5.8 billion impairment charge related to primary-care provider VillageMD, adjusted earnings for the quarter beat expectations at $1.20 a share, while analysts surveyed by Bloomberg estimated 82 cents. Revenue in the period was $37.1 billion, beating Wall Street’s expectation of $35.9 billion.
