Walgreens Sales Drop Off After Early Coronavirus Surge -- WSJ

By Sharon Terlep and Micah Maidenberg

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 3, 2020).

Pharmacy chain Walgreens Boots Alliance Inc. said U.S. store sales fell sharply in the final week of March, offsetting gains from an initial surge in demand as Americans rushed to stock up amid the spread of coronavirus.

The drop-off could have broader implications for U.S. retailers given that drugstores are among the few businesses permitted to operate even in places with the tightest restrictions, and the chain sells staples and medications in great demand amid the pandemic.

Walgreens provided an update on the pandemic's impact on business as it disclosed financial results for the quarter ended Feb. 29, a period that preceded the start of widespread consumer stockpiling of food and other goods.

"The full impact of Covid-19 won't be known for months," Walgreens finance chief James Kehoe said in a call with analysts, referring to the disease caused by the virus. "The situation is quite fluid and we expect volatility."

Walgreens' shares were down more than 5%, to $40.79, in late morning trading. At that level, shares would have their lowest close since March 8, 2013.

The Deerfield, Ill.-based chain generated stronger-than-expected sales during its latest quarter. It reported $35.82 billion in sales for the quarter ended Feb. 29, up from $34.53 billion a year earlier. Operating income fell 19% to $1.2 billion, in part because of reimbursement pressure on prescription drugs.

Earnings dropped to $946 million, or $1.07 a share, from $1.16 billion, or $1.24 a share, a year earlier. The company said it earned an adjusted profit of $1.52 a share for the latest period, 6 cents more than analysts forecast.

In March, executives said, the end-of-month drop off was most pronounced in communities where residents have been directed to stay home. Sales of beauty products and so-called seasonal items such as holiday decorations fell sharply, while sales rose for health-related products and staples.

Walgreens, in the midst of a restructuring program, is diverting funds intended to enable cost-cutting to instead manage the coronavirus crisis. The company is paying bonuses to workers, increasing home delivery and shortening store hours. In the U.K., where Walgreens operates the drugstore chain Boots, the company has shut down most of its 600 optician centers.

Executives said the company is well-positioned to ride out the pandemic, though uncertainty grows if mass lockdowns continue beyond May. A planned share buyback program will proceed as planned.

"We are confident this is a temporary situation," Mr. Kehoe said.

Write to Sharon Terlep at sharon.terlep@wsj.com and Micah Maidenberg at micah.maidenberg@wsj.com

(END) Dow Jones Newswires

April 03, 2020 02:47 ET (06:47 GMT)

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