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Walgreens Swings to Loss as COVID Hits Sales


Walgreens Boots Alliance reported lower-than-expected quarterly earnings on Thursday as sales took a big hit from the coronavirus pandemic despite a 3{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} increase in U.S. same-store sales.

The retailer said the pandemic had an adverse impact on sales in the third quarter of about $700 million to $750 million, most of which was related to its international business, with the U.K. particularly hard hit by stay-at-home orders.

There was “a dramatic reduction in footfall in Boots UK stores — down 85 percent in April — as consumers were advised to leave home only for food and medicine,” Walgreens said, adding that while stores remained open during the U.K. lockdown, its largest our largest premium beauty and fragrance counters were effectively closed.

For the quarter, Walgreens’ total revenue rose only 0.1{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} to $34.63 billion. It posted a net loss of $1.7 billion, or $1.95 per share, compared to net income of $1 billion, or $1.13 per share, a year earlier.

The loss included 61 cents to 65 cents per share in COVID-19-related costs and impacts. Excluding those items, Walgreens earned 83 cents per share, missing analysts’ estimates of $1.17 per share.

CEO Stefano Pessina said the company would “accelerate our ongoing investments in digital transformation and neighborhood health destinations” in response to the crisis. It is also raising its annual cost-savings target to more than $2 billion by 2022.

“What’s important now is that we’re taking swift action, both operationally and financially,” Global CFO James Kehoe said on an earnings call.

But on news of the earnings, Walgreens shares fell 8.3{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} to $38.78 in trading Tuesday.

While Walgreens profits were dragged down by its U.K. stores in the third quarter, sales at U.S. stores open at least a year easily beat analysts’ expectations of a 0.2{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} decline as, in the pharmacy section of the stores, brand inflation, and an increase in specialty sales offset the drop in prescription volumes because of COVID-19.

Same-store retail sales grew by 1.9{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} in the U.S., reflecting strong customer demand for vitamins and protective equipment like masks.

coronavirus, COVID-19, earnings, James Kehoe, Pharmacy, retail, Stefano Pessina, Walgreens Boots Alliance


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