Shares of Walgreens closed more than 20% lower on Thursday after the company reported fiscal third-quarter earnings that fell short of expectations and slashed its full-year adjusted profit outlook, citing a “challenging” environment for pharmacies and U.S. consumers.
The retail pharmacy giant now expects fiscal 2024 adjusted earnings of $2.80 to $2.95 per share. That compares with the company’s previous outlook of between $3.20 and $3.35 per share.
“‘We assumed … in the second half that the consumer would get somewhat stronger” but “that is not the case,” Walgreens CEO Tim Wentworth told CNBC.
He added that “the consumer is absolutely stunned by the absolute prices of things, and the fact that some of them may not be inflating doesn’t actually change their resistance to the current pricing. So we’ve had to get really keen, particularly in discretionary things.”
Still, Walgreens topped revenue estimates for the quarter on strong performance in its health-care segment. The company views that business division as critical to its ongoing push to transform from a major drugstore chain into a large health-care company.
The results come as Walgreens works to slash costs after a rocky last year marked by low pharmacy reimbursement rates, weakening demand for Covid products and a challenging macroeconomic environment.
The company on Friday said it is simplifying its U.S. health-care portfolio and finalizing plans to close underperforming U.S. stores over multiple years, among other ongoing cost-cutting efforts.
“Seventy-five percent of our stores drive 100% of our profitability today,” Wentworth said. “What that means is the others we take a hard look at, we are going to finalize a number that we will close.”
Here’s what Walgreens reported for the three-month period ended May 31 compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: 63 cents adjusted vs. 68 cents expected
- Revenue: $36.4 billion vs. $35.94 billion expected
Walgreens booked sales of $36.4 billion for the quarter, up 2.6% from the same period a year ago.
The company reported net income of $344 million, or 40 cents per share, for the quarter. That compares with net income of $118 million, or 14 cents per share, for the same period a year ago.
Excluding certain items, adjusted earnings were 63 cents per share for the quarter.
Walgreens did not provide a new revenue forecast for the fiscal year. The company has not offered that guidance since October, when it said it expected $141 billion to $145 billion in sales.
Strong performance in health-care division
Walgreens reported growth across its three business divisions in the fiscal third quarter. But the company’s U.S. health-care unit stood out, as sales jumped 7.6% compared with the same period a year ago.
Revenue for the segment came in at $2.13 billion. Analysts had expected sales of $2.08 billion, according to estimates compiled by FactSet.
The company said the higher sales…
Read More: Walgreens (WBA) earnings Q3 2024
