Walgreens tops Street but profit slides; cuts HQ staff, ups cost-savings target
Walgreens Boots Alliance reported fourth quarter sales and earnings that topped Street expectations but its profit fell amid costs.
Walgreens’ net income fell to $677 million, or 75 cents per share, in the quarter ended August 30, down from $1.51 billion, or $1.55 per share in the year-ago period. The company attributed the drop to expenses associated with its cost-cutting program. Adjusted earnings came to $1.43 per share, above the $1.41 analysts had expected.
On a call with analysts, CFO James Kehoe said that company made “select reductions” in its U.S. headquarters in Deerfield, Ill., last week. Walgreens also is reducing and reorganizing its global digital and IT teams under a new chief information officer, he said.
Kehoe noted that the company has completed a review of its real estate footprint. In August, Walgreens announced plans to close about 200 U.S. stores as part of its previously announced “transformational cost management program” to deliver annual cost savings in excess of $1.5 billion by 2022. On Monday, the company raised its savings target to more than $1.8 billion by fiscal 2022.
Walgreen also announced an in-store partnership to open Jenny Craig weight loss locations in some 100 of its stores.
For the fourth quarter, Walgreens’ total revenue rose 1.5% to $33.95 billion, up from $33.4 billion last year. Analysts had expected $33.89 billion.
The company’s retail pharmacy USA division reported sales of $26.0 billion, an increase of 2.1% over the year-ago quarter. Same-store sales rose 3.4%. Pharmacy sales, which accounted for 75% of the division’s sales in the quarter, increased 4.2% amid higher brand inflation and prescription volume.
Retail (non-pharmacy) sales fell 3.9%. Comparable retail sales decreased 1.2%, which the company attributed “entirely” due to a continued de-emphasis of tobacco.
For the full year, Walgreens’ sales increased 4.1% to $136.9 billion. Net earnings decreased 20.7% to $4.0 billion.
“We are pleased to report fiscal 2019 results in line with our previously stated guidance despite a challenging operating environment,” said executive vice chairman and CEO Stefano Pessina. “We are also making progress on our four strategic priorities, which we remain confident are positioning us to deliver long-term growth. While we still face headwinds, I am encouraged by the improvement in U.S. comparable sales performance in the second half of fiscal 2019 and our progress in managing costs in order to save to invest to grow.”