Walgreens Tops Estimates as Prescriptions Make Up for Retail

  • U.S. same-store retail segment sales decline 0.6 percent
  • Earnings are $1.03 a share, top analysts' estimate by 7 cents

Walgreens Boots Alliance Inc. beat analysts’ earnings estimates of fiscal first-quarter earnings estimates, as strong prescription drug trends made up for a retail slump that continues to affect the company.

Walgreens drew in shoppers with a better experience and more high-end products after renovating its stores. In the U.S., the drugstore chain’s biggest market, same-store retail shrank fell 0.6 percent in the quarter ended Nov. 30 compared with a year before, Walgreens said in a statement Thursday. It’s a lackluster figure that hasn’t kept up with gains in the prescription drug dispensing business.

Earnings, excluding one-time items, were $1.03 a share, compared with the 96 cents average of analysts’ estimates. The shares gained as much as 3.5 percent Thursday, in a market that was mostly down after stocks fell in China and Europe.

  • U.S. drugstore sales were $20.4 billion, up 4.2 percent from a year ago. 
  • U.S. same-store sales rose 5.8 percent, with pharmacy sales gaining 9.3 percent and retail declining 0.6 percent, Walgreens said, “primarily due to a reduction in unprofitable promotions and the transitioning of seasonal items away from holiday decorations and toward higher quality, giftable items.”
  • U.S. pharmacies filled 231 million prescriptions in the quarter, up 4.1 percent from a year ago.
  • Total sales were $29 billion, up 48 percent, thanks to the merger of Walgreen Co. and Alliance Boots GmbH in Dec. 2014.
  • The company raised the low end of its earnings guidance for fiscal year 2016 by 5 cents, to $4.30 to $4.55 per adjusted share.

On a call with investors Thursday, Chief Executive Officer Stefano Pessina was asked if he might acquire a pharmacy benefit manager, expanding the company’s pharmacy operations. Pessina said that the company was “always open” to deals of various sorts, from mergers to commercial agreements.

“Any kind of vertical integration is good,” though Walgreens is focused on digesting its current acquisitions, he said. In October, the company agreed to acquire Rite Aid Corp. for about $9.4 billion and expects the deal to close in the second half of 2016.

Walgreens rose 2.7 percent to $81.74 at 11:25 a.m. in New York.

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