Walgreens Q4 tops Street; will spend $750 million-plus to rebrand Rite Aid stores
The nation's largest drug store chain topped analysts’ expectations in its fourth quarter despite a 22% drop in profit related to break-up fees over its abandoned Rite Aid deal.
Walgreens Boots Alliance's earnings dropped 22% to $802 million in the quarter ended Aug. 31. Earnings were impacted by more than $300 million in termination fees and costs related to the company's drawn-out acquisition of rival Rite Aid Corp., which it called off in June amid regulatory concerns. Walgreens went on to enter a deal to purchase 1,932 stores from Rite Aid, or nearly half the chain.
Excluding one-time items, Walgreens reported adjusted earnings of $1.31 per share. Analysts expected earnings of $1.22 per share.
Total revenue rose 5.3% to $30.15 billion, also better than expected. Same-store sales rose 3%. Sales in Walgreens' U.S. retail pharmacy division's sales rose 7.5% to $22.3 billion; same-store rose 3.1%.
Pharmacy sales, which made up 72.1% of the division’s sales in the quarter, increased 12.6%, primarily due to higher prescription volumes and its new combined specialty pharmacy and mail services company, AllianceRx Walgreens Prime. Retail sales fell 3.9%, with same-store sales down 2.1%.
With regards to the acquired Rite Aid stores, Walgreens said the first few locations have been acquired in the past week. Ownership of the remaining stores is expected to be transferred in phases and be completed by spring 2018.
Walgreens expects to complete the integration of the acquired stores and related assets within the next three years for an estimated cost of approximately $750 million, which will be reported as acquisition-related costs. The company also plans to spend approximately $500 million of capital on store conversions and related activities.
"The acquisition of Rite Aid stores has given Walgreens a strategic play for the next year or so," commented Håkon Helgesen, analyst at GlobalData Retail "However, it does not mean that the company can neglect the day-to-day running of the business. Here we believe much more effort is needed on the retail side where results remain anemic....admittedly some of the softness in retail is the result of pulling back from various e-commerce operations. Even so, it suggests that store performance is still below par -- especially in basic personal care and household essentials." For more commentary, click here.
For the year, Walgreens reported profit of $4.08 billion, on $118.21 billion in revenue. The company said it expects 2018 adjusted earnings per share to range between $5.40 and $5.70. Analysts had forecast, on average, $5.45 per share.
Walgreens Boots Alliance's earnings dropped 22% to $802 million in the quarter ended Aug. 31. Earnings were impacted by more than $300 million in termination fees and costs related to the company's drawn-out acquisition of rival Rite Aid Corp., which it called off in June amid regulatory concerns. Walgreens went on to enter a deal to purchase 1,932 stores from Rite Aid, or nearly half the chain.
Excluding one-time items, Walgreens reported adjusted earnings of $1.31 per share. Analysts expected earnings of $1.22 per share.
Total revenue rose 5.3% to $30.15 billion, also better than expected. Same-store sales rose 3%. Sales in Walgreens' U.S. retail pharmacy division's sales rose 7.5% to $22.3 billion; same-store rose 3.1%.
Pharmacy sales, which made up 72.1% of the division’s sales in the quarter, increased 12.6%, primarily due to higher prescription volumes and its new combined specialty pharmacy and mail services company, AllianceRx Walgreens Prime. Retail sales fell 3.9%, with same-store sales down 2.1%.
With regards to the acquired Rite Aid stores, Walgreens said the first few locations have been acquired in the past week. Ownership of the remaining stores is expected to be transferred in phases and be completed by spring 2018.
Walgreens expects to complete the integration of the acquired stores and related assets within the next three years for an estimated cost of approximately $750 million, which will be reported as acquisition-related costs. The company also plans to spend approximately $500 million of capital on store conversions and related activities.
"The acquisition of Rite Aid stores has given Walgreens a strategic play for the next year or so," commented Håkon Helgesen, analyst at GlobalData Retail "However, it does not mean that the company can neglect the day-to-day running of the business. Here we believe much more effort is needed on the retail side where results remain anemic....admittedly some of the softness in retail is the result of pulling back from various e-commerce operations. Even so, it suggests that store performance is still below par -- especially in basic personal care and household essentials." For more commentary, click here.
For the year, Walgreens reported profit of $4.08 billion, on $118.21 billion in revenue. The company said it expects 2018 adjusted earnings per share to range between $5.40 and $5.70. Analysts had forecast, on average, $5.45 per share.