With Rite Aid deal on track, Walgreens Boots Alliance Q3 sales hit $29.5 billion

Walgreens Boots Alliance reported climbing sales and profits in a generally successful third quarter of fiscal 2016.



Adjusted net earnings attributable to Walgreens Boots Alliance per diluted share for the quarter increased 15.7% to $1.18 compared with the same quarter a year ago. Fiscal 2016 third quarter earnings adjustments were a net increase to GAAP net earnings attributable to Walgreens Boots Alliance of $185 million or 17 cents per diluted share. The retailer reported an adjusted net earnings increase of 14.7% to $1.3 billion for its third quarter ended May 31.



Net sales in the third quarter were $29.5 billion, an increase of 2.4% over the year-ago quarter, or 3.3% on a constant currency basis. Walgreens Boots Alliance's Retail Pharmacy USA division had third quarter total sales of $21.2 billion, an increase of 3.7% over the year-ago quarter. Sales in comparable stores increased 3.9% compared with the same quarter a year ago.



“We delivered solid results in the quarter while continuing to make progress in several key areas, including our work to develop long-term strategic relationships and pursue partnership opportunities," stated Stefano Pessina, Walgreens Boots Alliance executive vice chairman and CEO. "I’m pleased to report that since the quarter end we achieved our goal set four years ago of at least $1 billion in combined net synergies in fiscal year 2016 related to the strategic combination with Alliance Boots. This provides us with a strong platform to further enhance operating performance, to meet the challenges of the current volatility in many of our markets and to better position our company for long-term success.”



Combined net synergies were $330 million in the fiscal 2016 third quarter and $947 million in the first nine months of fiscal 2016. In June, the company achieved its goal set in 2012 to reach at least $1 billion in combined net synergies in fiscal 2016 relating to the strategic combination with Alliance Boots. This excludes the synergy benefits related to the company’s strategic, long-term relationship with AmerisourceBergen, the benefits of refinancing the legacy Alliance Boots indebtedness at a lower cost and the proposed Rite Aid acquisition.



Walgreens Boots Alliance GAAP operating cash flow totaled $2.1 billion in the third quarter, while the company generated free cash flow of $1.9 billion in the quarter.



Walgreens Boots Alliance’s proposed acquisition of Rite Aid Corporation, which was announced Oct. 27, 2015, is progressing as planned, the company stated. Walgreens Boots Alliance is continuing its integration planning and continues to expect the Rite Aid transaction to close in the second half of calendar 2016.



The company raised the lower end of its guidance for fiscal year 2016 by 10 cents per share and now anticipates adjusted net earnings per diluted share attributable to Walgreens Boots Alliance of $4.45 to $4.55.



Pharmacy sales across Walgreens Boots Alliance's Retail Pharmacy USA division, which accounted for 67.4% of the division’s total sales in the quarter, increased 5.8% compared with the year-ago quarter, while comparable pharmacy sales increased 6%. The division filled 235 million prescriptions (including immunizations) adjusted to 30-day equivalents in the quarter, an increase of 3.9% over last year’s third quarter.



Prescriptions filled in comparable stores increased 4.5% compared with the same quarter last year, primarily due to continued growth in Medicare Part D volume. The division’s retail prescription market share on a 30-day adjusted basis in the third quarter increased approximately 30 basis points over the year-ago quarter to 19.6%, as reported by IMS Health.



Comparable retail sales increased 0.1% in the third quarter compared with the year-ago period, primarily due to higher sales in the health and wellness and photo categories, partially offset by declines in certain convenience categories. The division is focused on profitable sales growth in future quarters, in part through a new, differentiated beauty offering. The first phase of these updates is in progress, with a rollout to more than 1,800 stores by the end of calendar 2016.



Retail Pharmacy International had third quarter total sales of $3.2 billion, a decrease of 2.3% over the year-ago quarter due to currency translation, with total sales increasing by 3.4% on a constant currency basis.



Pharmaceutical Wholesale had third quarter total sales of $5.7 billion, an increase of 0.7% over the year-ago quarter. In April, the company sold Alliance Healthcare Russia to the Russian health and beauty retailer 36.6 in return for a 15% stake in the combined group. On a constant currency basis, excluding acquisitions and dispositions, comparable sales increased 6.3%. This was ahead of the company’s estimate of market growth weighted on the basis of country wholesale sales, and was particularly strong in a number of emerging markets, Walgreens Boots Alliance reported.