Walgreens swings to Q3 profit; details growth strategy

Marianne Wilson
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Walgreens Boots Alliance Inc. reported a stronger-than-expected third quarter and raised its outlook for the year.

The pharmacy retailer also revealed details about its strategic priorities under new CEO Rosalind Brewer, former COO of Starbucks, who took the reins in March. Priorities include creating “neighborhood health destinations around a more modern pharmacy.” To that end, Walgreens has opened 46 Village Medical at Walgreens stores. It plans to open 35 more by the end of this year, for a total of approximately 80 co-locations.

In addition, the company has begun operations at two micro-fulfillment centers in Phoenix and Dallas as part of its partnership with pharmacy automation provider iA. The centers currently support some 550 Walgreens stores, with expectations for them to support roughly 1,000 locations. 

“This quarter’s results demonstrate continued momentum, and while challenges lie ahead, we are in a strong position to grow and innovate our core retail and pharmacy businesses for the future,” stated Brewer. “We are accelerating our investments to advance our operational excellence, including technology innovations that support mass personalization, pharmacy of the future and the next phase of growth in tech-enabled healthcare.”

Walgreens’ net income totaled $1.197 billion, or $1.38 per share, for the quarter ended May 31, compared to a loss of $1.708 billion, or $1.95 per share, in the year-ago period. Adjusted earnings per share of $1.51 beat analysts’ estimates of $1.16. During the quarter, the company completed its divestiture of Alliance Healthcare to AmerisourceBergen for $6.5 billion, the proceeds from which were used to pay off $3.3 billion in debt and invest in its retail pharmacy and healthcare businesses. 

Sales rose 12.1% to $34.03 billion, topping estimates of $33.49 billion. The company’s U.S. segment saw sales of $28.7 billion, up 5.1% from the prior-year quarter, with comparable-store sales up 6.4% year over year. The comp growth was a combination of an 8.4% increase in comparable pharmacy sales and 1.7% growth in comparable retail sales. Comparable scripts filled grew by 9.8% over the prior period, reflecting a 600-basis-point impact from COVID-19 vaccinations. Overall pharmacy sales rose 6.3% over the previous-year period. Retail sales increased by 1.4%, with comparable retail sales up 1.7%, which the company said was due to its mass personalization efforts, as well as strong beauty and photo sales amid improved traffic trends. 

Walgreens noted that, through June, it has administered more than 25 million COVID-19 vaccinations. 

Walgreens raised its fiscal 2021 adjusted earnings per share guidance to mid-to-high single-digit growth to 10% growth. It had previously forecast growth in the mid-to-high single digits.