Walgreens cuts outlook
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Walgreens Boots Alliance Inc. cut its profit forecast for the year, hurt by lower pandemic demand and a slow transition to healthcare.
Adjusted annual earnings will be $4 to $4.05 per share, the Deerfield, Ill.-based company said in a statement on Tuesday, down from the previous range of $4.45 to $4. $65. Adjusted earnings for the third quarter were $1 per share, below analysts’ average estimate of $1.06.
Walgreens faces a rapidly changing competitive environment. On November 17, 2020, online retail giant Amazon.com Inc. announced that it would extend its push to prescription drug sales in the United States.
Walgreens Boots is ranked #19 in the Digital Commerce 360 Top 1000, which ranks retailers based on annual web sales.
“We’ve seen shifting market trends that are pushing consumers toward value in response to a more uncertain and challenging economic environment,” chief executive Roz Brewer said on an earnings call. “There has been a sharp decline in Covid vaccines and testing, and with the end of the public health emergency, we are also experiencing a slower profit ramp for US health care.”
After the pandemic draws people into pharmacies for vaccines and testing, cracks are starting to reappear in the business model that depends on pharmacy-driven foot traffic to sell higher-margin items like toothpaste and tablets. over-the-counter therapies. The end of the pandemic emergency has also seen states remove residents from rosters for Medicaid, the health program for low-income people.
Savings target
And while Walgreens is betting on expanding into the broader healthcare world — adding primary care centers to U.S. sites, partnering with insurers and moving into clinical trial recruiting — the transition isn’t going anywhere. was not easy.
“The health services segment is taking longer to rise,” Bloomberg Intelligence analyst Jonathan Palmer said in a note, “which is not a huge surprise and at the same time Walgreens’ ability to catalyzing unity by deploying capital is slowly drying up.
Quarterly U.S. healthcare sector revenue matches the average analyst estimate of $2 billion.
Walgreens raised the savings target for a cost-cutting program to $4.1 billion from $3.5 billion, and expects savings of $800 million in the fiscal year 2024. The company said in May it would cut 10% of its workforce, or around 504 employees, as it seeks to restructure to better align with a focus on patient care. Those job cuts were completed in about four months, chief financial officer James Kehoe said on the call, saving more than $100 million.
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