Walgreens slashes earnings guidance due to lower consumer spending, drop in Covid care demand

Walgreens on Tuesday slashed its full-year earnings guidance as it fell short of Wall Street expectations for its fiscal third quarter due to lower consumer spending and a drop in demand for Covid vaccines and testing.

The retail pharmacy chain lowered its earnings guidance to a range of $4.00 to $4.05 per share for the full year, down from its previous forecast of $4.45 to $4.65 per share.

CEO Rosalind Brewer said she is increasing Walgreen’s cost-cutting initiative to $4.1 billion and is taking immediate action to increase profitability in the company’s U.S. health-care segment.

“I am confident that our turnaround strategy positions WBA to drive sustainable core growth and deliver long-term shareholder value,” Brewer said in a statement.

Shares of Walgreens fell roughly 7% in premarket trading following the release.

Here’s how Walgreens performed in its fiscal third quarter compared with what Wall Street was expecting based on analyst estimates polled by Refinitiv:

• Earnings: $1.00 per share adjusted, vs. $1.07 expected.
• Revenue: $35.42 billion, vs. $34.24 billion expected.

The earnings miss is the first time Walgreens has underperformed analyst expectations since July 2020.

But the company beat revenue expectations and posted sales growth, booking sales of $35.4 billion in the quarter — 8.6% higher than revenue of $32.6 billion in the same period a year earlier — due to growth in its retail pharmacy and health-care segments.

Walgreens booked a net profit of $118 million for the quarter, or 14 cents per share unadjusted, a 59% drop from the $289 million in income the company reported in the same quarter last year. The drop was due primarily due to lower operating income, according to the company.

The company’s U.S. retail pharmacy segment generated about $28 billion sales for the quarter, an increase of 4.4% compared to the same period last year. Comparable sales at individual locations increased 7% compared to the fiscal third quarter of 2022.

Walgreens pharmacy sales also increased 6.3% compared to the same quarter last year, with comparable sales up nearly 10% due to price inflation in brand medications.

Total prescriptions filled in the quarter, including immunizations, increased slightly by 0.1% for a total of 305 million. Covid vaccines administered during the period plummeted 83% to 800,000, down from 4.7 million in the same period last year.

Sales in Walgreens U.S. health-care segment came in at $2 billion, a $1.4 billion increase compared to the same period last year.

The company’s partnership with primary-care provider VillageMD, which includes urgent care provider Summit Health, saw revenue grow by 22%. Sales at Walgreens at-home health-care provider CareCentrix increased 15% due to additional service offerings.