Walgreens' U.S.-based pharmacy ops drive Q2 growth

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Walgreens' U.S.-based pharmacy ops drive Q2 growth

By Michael Johnsen - 03/28/2018
Walgreens Boots Alliance on Wednesday posted sales of $33 billion for its second quarter ended Feb. 28, an increase of 12.1% from the year-ago quarter, and an increase of 9.4% on a constant currency basis.

“Our growth strategy of increasing and consolidating volume, differentiating ourselves through value and quality of service, and controlling costs is bearing fruit across our businesses," Stefano Pessina, executive vice chairman and CEO of the Deerfield, Ill.-based retailer, said. "This is reflected in another good set of financial results in which we delivered the highest sales growth in eight quarters, as well as strong cash generation and record U.S. pharmacy market share. We expect to continue to grow, in part through the recent acquisition of stores from Rite Aid, and today we are raising our fiscal 2018 guidance."

Shares of Walgreens Boots Alliance were up $2.54 to $68.50 in pre-market trading as the Chicagoland retailer beat analyst estimates. According to reports, Wall Street had expected the pharmacy operator to report earnings per share of $1.55, up 14%, with revenue increases of 9% to $32 billion.

In addition to beating revenue expectations by $1 billion, Walgreens Boots Alliance earned $1.73 a share.

Retail Pharmacy USA had second quarter sales of $24.5 billion, an increase of 12.2% over the year-ago quarter. Sales in comparable stores increased 2.4%.

Pharmacy sales, which accounted for 70.3% of the division’s sales in the quarter, increased 18.7% compared with the year-ago quarter, primarily due to higher prescription volume including central specialty and mail following the formation of AllianceRx Walgreens Prime and from the acquisition of Rite Aid stores.

Comparable pharmacy sales increased 5.1%, primarily due to higher volume. The division filled 269.2 million prescriptions (including immunizations) adjusted to 30-day equivalents in the quarter, an increase of 9.1% over the year-ago quarter. Prescriptions filled in comparable stores increased 4% compared with the same quarter a year ago, primarily due to volume growth from previously announced strategic pharmacy partnerships and Medicare Part D growth.

Retail sales decreased 0.7% in the second quarter compared with the year-ago period. Comparable retail sales were down 2.7% in the quarter.

As of the end of the second quarter the company had acquired 1,542 Rite Aid stores under the previously announced amended and restated asset purchase agreement. Since the end of the quarter the company completed the acquisition of all 1,932 stores. The transition of three distribution centers and related inventory is expected to begin during fiscal 2019.

The company continues to expect to complete integration of the acquired stores and related assets by the end of fiscal 2020, as previously announced.

As part of a program to optimize locations, the company continues to expect to close approximately 600 stores and related assets over an 18-month period. Cost savings from the program are still anticipated to be approximately $300 million per year and are still expected to be fully delivered by the end of fiscal 2020.

As Pessina mentioned, Walgreens raised the lower and upper ends of its guidance for fiscal 2018 and now anticipates adjusted diluted net earnings per share of $5.85 to $6.05. The company now expects to obtain a cash tax benefit from the U.S. tax law changes in excess of $350 million for fiscal year 2018, compared with the previous estimate, announced in January, of more than $200 million.

WBA's Retail Pharmacy International division posted second quarter sales of $3.3 billion, an increase of 7% from the year-ago quarter due to currency translation. Sales decreased 2.6% on a constant currency basis. Meanwhile, the company's Pharmaceutical Wholesale division realized second quarter sales of $5.8 billion, an increase of 14.4% from the year-ago quarter, mainly due to currency translation.