Walgreens Q1 tops Street; warns of rising labor costs

Walgreens Boots Alliance reported fiscal first-quarter results that beat expectations and raised its full-year guidance as customers flocked to its stores for COVID booster shots, testing and at-home test kits. 

The pharmacy retailer said it administered 15.6 million Covid vaccines in the first quarter, for a total to more than 56 million to date. Its pace of vaccinations accelerated from the previous quarter amid booster shots and first-time shots for children.

On the company’s earnings call, CFO James Kehoe said the company will spend $120 million more on wages to keep up with demand and compete in a very tight labor market.

Net income totaled $3.58 billion, or $4.13 per share, in the quarter ended Nov. 30, compared to a loss of $308 million, or $0.36 per share in the year-ago period. Adjusted earnings of $1.68 topped analysts’ estimates for $1.36.

Total revenue rose to $33.90 billion from $31.44 billion, beating estimates of $32.88 billion. U.S. retail comparable sales rose 10.6%, the highest gain in more than 20 years, the company said. Boots UK comparable sales rose 16.3%.  Digital sales in the U.S. jumped 88%.

Walgreens continued its push into health care during the quarter.  In October, the company said it will invest $5.2 billion in VillageMD, increasing its ownership stake in the company from 30% to 63%. Walgreens said the investment will accelerate the opening at least 600 Village Medical primary care clinics at Walgreens locations in more than 30 U.S. markets by 2025, with a goal of1,000 by 2027. To date, the company has opened 81 Village Medical locations.

The company is also allocating space in select locations for a Health Corner that is staffed by nurses and pharmacists who can consult with patients on chronic conditions or other medical needs. It has opened 47 such spaces to date, with plans to have more than 100 in place by the end of 2022.

[Read More: Walgreens Q4 tops estimates; launches new business segment focused on health care]

“First quarter results exceeded our expectations, with a very encouraging performance across all our business segments,” said CEO Rosalind Brewer. “I am particularly excited about the progress we’re making in building out Walgreens Health. Our majority investments in VillageMD and Shields closed during the quarter, and we’re rolling out VillageMD primary care co-locations and Walgreens Health Corners at pace. The strong start to the fiscal year reinforces our confidence in the future, and as a result, we are raising our guidance for the full year and increasing investments in our people. Looking ahead, we are well-positioned for sustainable, long-term value creation.”

Walgreens raised its full-year adjusted EPS guidance to low single-digit growth from flat previously.