Walgreens Stock Plunges After Missing Expectations And Cutting Guidance


Walgreens Boots Alliance Inc.  shares took a beating in pre-market trade Tuesday, after the drugstore chain announced disappointing second-quarter results and slashed its full-year earnings forecast. Chief Executive Stefano Pessina said that the period ended Feb. 28, 2019 was the most difficult since Walgreens Co. acquired Alliance Boots GmbH.

Walgreens’ rival CVS Health Corp.  also warned investors in March that 2019 profit might not be impressive due to significant additional deterioration in its long-term care unit.

Shares of Walgreens were down 9.89% to $57.21 in pre-market trade following the downbeat earnings report. The stock closed Monday’s regular session at $63.49 a share.

WBA Earnings & Outlook

Walgreens posted net income of $1.16 billion, or $1.24 per share, compared with $1.35 billion, or $1.36 per share, in the prior-year ago. Adjusted for one-time items, earnings came to $1.64 per share, down 5.4% on year-over-year basis.

On average, analysts surveyed by Refinitiv had called for adjusted earnings of $1.72 per share. Revenue was pegged at $34.53 billion, up 4.6% as the company continued integrating its Rite Aid stores. Analysts was expecting the company to post second-quarter revenue of $34.56 billion, according to figures compiled by Refinitiv.

U.S. retail pharmacy sales were $26.3 billion, an increase of 7.3% from the same period last year. Comparable retail sales fell 3.8%, while same-store pharmacy sales jumped 1.9%. Walgreens attributed the slump in comparable retail sales to a weak cold, flu, and cough season, as well as decline in sales of seasonable merchandise.

For the full year, Walgreens is now expecting “roughly flat” adjusted EPS growth from 7% to 12%, thanks in part to declining prices of generic drugs.

Walgreens CEO Comments

“The market challenges and macro trends we have been discussing for some time accelerated, resulting in the most difficult quarter we have had since the formation of Walgreens Boots Alliance. During the quarter, we saw significant reimbursement pressure, compounded by lower generic deflation, as well as continued consumer market challenges in the U.S. and UK,” said Stefano Pessina.

“While we had begun initiatives to address these trends, our response was not rapid enough given market conditions, resulting in a disappointing quarter that did not meet our expectations. As a result, we are now expecting roughly flat adjusted EPS growth for fiscal 2019,” Pessina concluded.

Walgreens Boots Alliance Profile

Walgreens is the nation’s largest retail pharmacy, with approximately 10,000 drugstores throughout the United States. The firm recently acquired half of Rite Aid’s locations, which increased its store count and scale.

This large network of stores enables the firm to reach a significant portion of the U.S. population, providing excellent brand recognition. Prescription drugs account for about two thirds of sales, with the balance attributable to front-store products such as grocery, health, and beauty items.