Walgreens Reports Strong Pharmacy Sales, but Front End Drags -- Update
July 06 2016 - 10:41AM
Dow Jones News
By Lisa Beilfuss
Walgreens Boots Alliance said sales edged up in its latest
quarter as it filled more prescriptions, though revenue fell short
of expectations as shopping remained constrained outside of the
pharmacy.
Shares in the company fell 2.2% in morning trading, pulling the
stock's year-to-date decline down to 4.1%.
The largest U.S. drugstore chain, formed when Walgreen and
Alliance Boots merged at the end of 2014, has been working to
reshape itself amid lower reimbursement rates and as the
fast-changing U.S. health-care marketplace prompts consolidation.
It is in the midst of completing its $9.4 billion acquisition of
Rite Aid Corp., which Walgreens said Wednesday is on track to close
in the second half of this year.
Earlier this year, it teamed up with United Healthcare Inc.'s
pharmacy-benefit manager OptumRx, and last month Walgreens shook up
its senior management ranks to lead what it says is the next phase
of its evolution. Also last month, the company pulled the plug on
its three-year partnership with embattled blood-testing firm
Theranos as regulators weigh sanctions against the firm for voiding
certain test results.
In its latest quarter, the Deerfield, Ill., company said overall
sales at stores open at least a year rose 3.9%, better than the
3.7% analysts expected and up from the 2.2% pace -- the lowest in
three years -- logged in the second quarter.
The improvement was driven by the company's pharmacy business.
Pharmacy sales jumped 6% on a comparable basis, nearly double the
prior quarter's rate, as it filled 4.5% more prescriptions thanks
to rising Medicare Part D volume. Results in the segment, which
makes up nearly three-quarters of overall revenue, "are solid and
somewhat of a relief" given that new Medicare Part D rates went
into effect at the start of the year "and this quarter reflects the
full impact of that incremental volume," said David Larsen, analyst
at Leerink Parners. Mr. Larsen had expected prescription volume to
rise at a slower 3.5% clip.
At the front end, where the company sells items from snacks to
greeting cards to beauty products, sales inched up 0.1% after
declining 0.3% a quarter earlier. Walgreens has been trying to spur
sales outside of its pharmacies, where spending has been
lackluster. The company reiterated Wednesday that it is focused on
rolling out higher-margin beauty products, a revamp that will
continue throughout the year.
Over all for the period, Walgreens reported a profit of $1.10
billion, or $1.01 a share, down from $1.30 billion, or $1.18 a
share, a year earlier. Excluding merger-related items and a change
in the fair value of warrants exercised to buy a stake in
AmerisourceBergen, among other things, per-share profit rose to
$1.18 from $1.02.
Revenue edged 2.4% higher to $29.50 billion. Analysts projected
$1.04 in adjusted earnings per share on $29.71 billion in sales,
according to Thomson Reuters.
The company lifted the low end of its profit forecast for the
year by a dime, now expecting to report $4.45 to $4.55 in adjusted
earnings per share. Walgreens said the guidance assumes no impact
from the pending Rite Aid deal.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
July 06, 2016 10:26 ET (14:26 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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