WBA's Q1 shows positive impact of acquired Rite Aid stores

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WBA's Q1 shows positive impact of acquired Rite Aid stores

12/20/2018
Walgreens Boots Alliance has shared the financial results for the first quarter of its fiscal year 2019. The company posted $33.8 billion in sales for the quarter, a 9.9% increase from the prior year’s first quarter, with net earnings up 36.8% to $1.1 billion. Net earnings per share increased by $45.7% to $1.18.

“We are pleased to have delivered double digit percentage growth in earnings per share in the first quarter, including solid results in the U.S. We continue to focus on and invest in transforming our business. We have made good progress on partnerships, including advancing our collaborations with Kroger, FedEx and Humana and, earlier this week, we announced an initiative with Verily to further expand our healthcare offering. Today, we are reaffirming our fiscal 2019 guidance and announcing the launch of a new transformational cost management program, which is targeting annual cost savings of more than $1 billion by the end of the third year to better position ourselves to meet our long-term targets.”

WBA’s retail pharmacy USA segment saw sales of $25.7 billion — a 14.4% year-over-year increase, which was largely attributable to acquired Rite Aid stores. Excluding the acquired stores, organic growth was 4.6%. Pharmacy sales — which comprised 74.4% of the division’s sales — grew 17.5% compared with the previous quarter. This was driven by higher prescription volume from acquired Rite Aid stores and from central specialty. Comparable pharmacy sales increased 2.8% and the division filled 289.8 million prescriptions, including immunizations, adjusted to 30-day equivalents, marking an 11.4% year-over-year increase.

Retail sales increased 6% in the quarter, with comparable-store sales down 3.2% — an occurrence the company attributed to de-emphasis of such products as tobacco and difficulty comparing first quarter 2019 to the prior-year period due to “exceptional events.” Gross profit for the division grew 7.1%, with adjusted gross profit up 6.1%. Operating income increased 3.5% year over year to $1.2 bullion, with adjusted operating income up 0.1% to $1.4 billion

Internationally, WBA’s retail pharmacy operations saw sales decrease 5.9% to $2.9 billion, reflecting a 2.3% adverse currency impact. The company attributed its 3.6% sales decrease on a constant currency basis in part to negative impacts of divesting Boots Contract Manufacturing the year before and a loyalty accounting change. The company said that increased market share for Boots U.K.was offset by a weak retail environment.

With regard to its pharmaceutical wholesale division, WBA saw first quarter sales of $5.7 billion, a 0.2% year-over-year decrease, which the company attributed to a 6.8% negative currency impact. On a constant currency basis, sales grew 6.6% for the division, particularly in emerging markets.

Walgreens Boots Alliance also announced a new cost-management program that is aimed at bringing annual cost savings of more than $1 billion by the end of its third year. The program's initiatives are aimed at optimizing divisions, global smart spending, global smart organizing and enterprise digitization to transform long-term capabilities. Divisional optimization, already underway, is focusing on cost-reduction efforts in WBA’s pharmaceutical wholesale division and the retail business in Chile and Mexico. It also has begun global smart spending and organization efforts, focused on its retail pharmacy USA, U.K. retail and global functions.