Walgreens Posts Hefty Q1 Loss, Adj. EPS Tops View; Backs FY23 Earnings Forecast

walgreens may07 05jan23 lt

Pharmacy major Walgreens Boot Alliance Inc. reported Thursday a hefty loss in its first quarter, mainly hit by charges related to opioid-related claims and weak sales. Adjusted earnings, and sales, however, topped market estimates mainly benefited by strong cough, cold, flu sales. Looking ahead, the company maintained its fiscal 2023 earnings view, and raised sales guidance.

In pre-market activity on Nasdaq, Walgreens shares were losing around 2.2 percent to trade at $36.65.

Chief Executive Officer Rosalind Brewer said, "We're making significant progress in driving our U.S. Healthcare segment to scale and profit, including the recent VillageMD acquisition of Summit Health. Our core retail pharmacy businesses in both the United States and United Kingdom remain resilient in challenging operating environments."

For fiscal 2023, the company continues to expect adjusted earnings per share of $4.45 to $4.65 as strong core business growth is more than offset by lapping fiscal year 2022 COVID-19 execution, and currency headwinds.

Further, the company now expects full-year sales of $133.5 billion to $137.5 billion, reflecting Summit Health acquisition, refreshed currency rates, and first quarter sales ahead of expectations.

In fiscal 2022, adjusted earnings per share from continuing operations was $5.04, on sales of $132.7 billion.

On average, 10 analysts polled by Thomson Reuters expect earnings of $4.48 per share for the year on sales of $134.8 billion. Analysts' estimates typically exclude special items.

The company also raised U.S. Healthcare targets with Summit Health announcement on November 7, including fiscal year 2025 sales goal to $14.5 billion to $16.0 billion, up from $11.0 billion to $12.0 billion expected previously.

Further, the company still expects low-teens adjusted earnings per share growth in fiscal year 2025 and beyond.

In the first quarter, net loss was $3.7 billion, compared to net income of $3.6 billion last year. Loss per share was $4.31, compared to earnings per share of $4.13 last year.

The latest quarterly results reflected, among other things, a $5.2 billion after-tax charge for opioid-related claims and litigation.

Adjusted net earnings were $1.0 billion or $1.16 per share, compared to $1.46 billion or $1.68 per share a year ago. Analysts estimated earnings of $1.13 per share for the quarter.

Adjusted operating income was $1.0 billion, a decrease of 42.2 percent on a constant currency basis, mainly reflecting lower volumes of COVID-19 vaccinations and testing.

Walgreens first-quarter sales decreased 1.5 percent to $33.4 billion from $33.90 billion in the year-ago quarter. But, sales increased 1.1 percent on a constant currency basis. Analysts estimated sales of $32.83 billion for the quarter.

Excluding the negative impact from AllianceRx Walgreens of 485 basis points and the positive contributions from U.S. Healthcare M&A of 280 basis points, sales growth was 3.2 percent on a constant currency basis.

The U.S. Retail Pharmacy segment sales of $27.2 billion decreased 3.0 percent, while comparable sales increased 3.8 percent, compared to comparable sales of 7.9 percent last year. The year-ago quarter included a significant contribution from COVID-19 vaccinations.

Pharmacy sales decreased 4.2 percent, negatively impacted by a 7.8 percentage point headwind from AllianceRx Walgreens.

Total prescriptions filled in the quarter, including immunizations, adjusted to 30-day equivalents, decreased 0.7 percent to 311.6 million.

Retail sales increased 0.8 percent and comparable retail sales increased 1.4 percent in the first quarter. Excluding tobacco, comparable retail sales increased 2.1 percent, benefited by strong cough, cold, flu sales.

The International segment sales decreased 10.8 percent, held back by an adverse currency impact.

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