Walgreens (WBA) Q4 2022 earnings

Walgreens Boots Alliance on Thursday beat fourth-quarter sales expectations as the drugstore chain repositions itself as a more healthcare-focused company.

The company said it expects full-year adjusted earnings per share of $4.45 to $4.65 in the coming fiscal year, roughly in line with what Wall Street expected. Still, Walgreens said its business growth will face tough comparisons as it seeks strong demand for Covid vaccines and is hit by the dollar’s strength.

Shares rose around 4% in pre-market trading.

Here’s what the company reported compared to what analysts expected for its fiscal fourth quarter ended Aug. 31, based on Refinitiv data:

• Earnings per share: 80 cents, adjusted, vs. 77 cents expected
• Income: $32.45 billion versus the expected $32.09 billion

Sales decreased from the previous year. Including certain costs, Walgreens posted a loss in the three-month period. Net loss was $415 million, or 48 cents per share, compared with net income of $627 million, or 72 cents per share, a year earlier.

The company said profits were hit by a non-cash write-down in the Boots UK business and from the long-term cost management programme. A year ago, Walgreens set a cost-savings goal of $3.3 billion by 2024.

Walgreens has made significant investments to transform itself from a large pharmacy chain to a large health care company. It opens hundreds of doctor’s offices with VillageMD. It invested $5.2 billion to become the majority owner of the primary care company. It recently announced plans to accelerate acquisitions of two other companies: CareCentrix, which coordinates care and home care benefits, and Shields Health Solutions, a specialty pharmacy company.

Walgreens CEO Roz Brewer said in a press release that the upcoming fiscal year “will be a year of accelerating core growth and rapid scaling of our US healthcare business.”

At the end of the quarter, Walgreens had a total of 334 doctors’ offices with VillageMD. The clinics, called Village Medical, are located next to the pharmacies. It also has 70 stores with Health Corners, a designated space where a registered nurse or pharmacist can schedule a mammogram, screen a patient for high blood pressure or diabetes or help with other health needs.

Covid vaccines, which boosted Walgreens sales and foot traffic, have dropped significantly. In the fourth quarter, the pharmacy chain administered 2.9 million vaccinations. This is a decrease from 4.7 million vaccines in the third quarter, and a sharp drop from 15.6 million vaccines in the first quarter and 11.8 million in the second quarter.

Sales in Walgreens’ US retail and pharmacy division fell 7.2% to $26.7 billion in the fourth quarter compared with the same period last year. However, comparable sales rose 1.6%.

The international business suffered a major blow from currency headwinds. It had revenue of $5.1 billion in the fourth quarter, down 6.6% from the same period last year. It included a negative currency effect of 13.3%.

As customers return to stores, Walgreens also said it is investing in its workforce to return to normal operating hours. However, it has continued to see some changes in shopping habits. Digital sales growth in the US grew 14% in the fourth quarter, on top of an 82% increase in the same period a year earlier.

On Thursday, the company raised the outlook for the healthcare system. It said it now expects a sales target of $12 billion, instead of $11 billion, for fiscal 2025.

As of Wednesday’s close, Walgreens shares are down nearly 39% so far this year. That follows the S&P 500, which is down around 25%. Shares of Walgreens closed Wednesday at $31.94, down about 2%.

Read the company’s earnings report here.

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