Walgreens Q1 sales up 1.4% as it works toward closing Rite Aid deal

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Walgreens Q1 sales up 1.4% as it works toward closing Rite Aid deal

By Michael Johnsen - 01/05/2017

DEERFIELD, Ill. – Still no announcement that Walgreens Boots Alliance has closed the deal on its proposed acquisition of Rite Aid, but that announcement will come soon, the company stated Thursday morning after posting first quarter sales of $20.7 billion, up 1.4%.

“Overall we are pleased with the progress this quarter, with results in line with our expectations," announced Stefano Pessina, Walgreens Boots Alliance executive vice chairman and CEO. "We continue to anticipate that growth in the second half of fiscal 2017 will reflect the new strategic pharmacy partnerships we announced last year [including PBMs Express Scripts and Prime Therapeutics]. As a result, we have raised the lower end of our fiscal year guidance by 5 cents per share.”

Walgreens operations in the U.S. realized a 1.1% quarterly increase in overall comparable sales. Pharmacy sales, which accounted for 69.1% of the division’s sales in the quarter, increased 2.5% compared with the year-ago quarter. Comparable pharmacy sales increased 2%.

The division filled 237.6 million prescriptions (including immunizations) adjusted to 30-day equivalents in the quarter, an increase of 3%  over the year-ago quarter. Prescriptions filled in comparable stores increased 3.4% compared with the same quarter a year ago, primarily due to continued growth in Medicare Part D volume. The division’s retail prescription market share on a 30-day adjusted basis in the first quarter increased approximately 40 basis points over the year-ago quarter to 19.5%, as reported by IMS Health. Growth in comparable sales resulted from increased pharmacy volume and brand inflation, partially offset by reimbursement pressure and the impact of generics.

Looking ahead, that pharmacy volume growth will continue to grow as Walgreens Boots Alliance continues to assimilate the new TRICARE pharmacy patients the company started serving in December, 2016. That was a significant development in the past year, Pessina told analysts Thursday morning. "The big achievement of last year [was] to create a bridge with the main PBMs and other big players in this industry," Pessina said. "Now we have certain joint ventures, new contracts [and] patients as a consequence of these bridges, but [also] we have something that is much more important  — we have established trust between us and a certain number of companies."

With this trust, Walgreens Boots Alliance expects to generate a number of profit-driving opportunities going forward, Pessina added. "Our relationship with Prime [Therapeutics], with Express Scripts and even with Optima [Health] are creating a new base of collaboration that will go beyond a simple contract," he said.

Retail sales decreased 0.9% in the first quarter compared with the year-ago period, which includes the impact of certain e-commerce operations. Comparable retail sales were down 0.5% in the quarter, though gains in core categories like OTC and beauty helped offset declines in consumables and general merchandise.

Since the end of the first quarter, the company has completed the first phase of the rollout of its new, differentiated beauty offering in more than 1,800 stores.

Walgreens  Boots Alliance confirmed it is actively engaged in discussions with the Federal Trade Commission regarding its pending Rite Aid acquisition, which was announced more than 14 months ago. Also subject to FTC approval is the sale of 865 Rite Aid locations to Fred's for almost $1 billion. "The company is working toward a close of the acquisition in the early part of this calendar year," Walgreens stated.

Walgreens Boots Alliance's international division had first quarter sales of $3 billion, a decrease of 14.4% from the year-ago quarter due to the negative impact of currency translation. Sales increased 0.5% on a constant currency basis.

Pharmaceutical Wholesale, meanwhile, had first quarter sales of $5.4 billion, a decrease of 6.5% from the year-ago quarter. On a constant currency basis, comparable sales increased 4.7%, which was slightly ahead of the company’s estimate of market growth weighted on the basis of country wholesale sales.