Walgreen Boots Alliance reports Q3 results
Walgreens Boots Alliance today announced financial results for the third quarter of fiscal 2024, which ended May 31, 2024.
CEO Tim Wentworth said, "We continue to face a difficult operating environment, including persistent pressures on the U.S. consumer and the impact of recent marketplace dynamics which have eroded pharmacy margins. Our results and outlook reflect these headwinds, despite solid performance in both our International and U.S. Healthcare segments."
Wentworth continued, "Informed by our strategic review, we are focused on improving our core business: retail pharmacy, which is central to the future of healthcare. We are addressing critical issues with urgency and working to unlock opportunities for growth. Many of these actions will take time, but I am confident that we have the right team and the right strategy to lead a business turnaround for the Walgreens that our customers and patients need.”
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WBA's third quarter sales increased 2.6% from the year-ago quarter to $36.4 billion, an increase of 2.5% on a constant currency basis, reflecting sales growth across all segments.
Third quarter operating income was $111 million compared to an operating loss of $477 million in the year-ago quarter, an increase of $588 million, which reflects lapping a $431 million non-cash impairment of pharmacy license intangible assets in Boots UK in the year-ago quarter. Adjusted operating income was $613 million, a decrease of 36.3% on a constant currency basis reflecting lower sale-leaseback gains and softer U.S. retail and pharmacy performance, partly offset by cost savings initiatives and improved profitability in the U.S. Healthcare segment.
The retailer’s net earnings in the third quarter were $344 million compared to net earnings of $118 million in the year-ago quarter, an increase of $225 million reflecting higher operating income. Adjusted net earnings were $545 million, down 36.5% on a constant currency basis, reflecting lower adjusted operating income.
The company’s EPS in the third quarter was 40 cents compared to 14 cents in the year-ago quarter, reflecting an increase of 26 cents. Adjusted EPS was 63 cents, reflecting a decrease of 36.6%, or 36 cents on both a reported and constant currency basis.
The retailer’s sales in the first nine months of fiscal 2024 increased 6.2% from the year-ago period to $110.1 billion, an increase of 5.6% on a constant currency basis, reflecting growth across all segments.
Operating loss in the first nine months of fiscal 2024 was $13.1 billion compared to an operating loss of $6.4 billion in the year-ago period, an increase in operating loss of $6.7 billion. Operating loss in the current period reflects a $12.4 billion non-cash impairment charge related to VillageMD goodwill, which resulted in a $5.8 billion charge attributable to WBA, net of tax and non-controlling interest. Operating loss in the current period also reflects a $455 million non-cash impairment charge related to certain long-lived assets in the U.S. retail pharmacy segment. Prior year operating loss reflects a $6.8 billion pre-tax charge for opioid-related claims and litigation and a $431 million non-cash impairment of pharmacy license intangible assets in Boots UK. Adjusted operating income was $2.2 billion, a decrease of 31.5% on a constant currency basis reflecting a challenging U.S. retail environment, reimbursement pressure and lower sale-leaseback gains, partly offset by cost savings and improved profitability in the U.S. healthcare segment.
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Net loss for the first nine months of fiscal 2024 was $5.6 billion compared to a net loss of $2.9 billion in the year-ago period, an increase in net loss of $2.7 billion, reflecting the non-cash impairment charges and lapping a $1.5 billion gain on sales of Cencora and Option Care Health shares last year. Adjusted net earnings decreased 24.9%, or $712 million to $2.2 billion, down 25.3% on a constant currency basis, reflecting lower adjusted operating income partly offset by a lower adjusted effective tax rate due to the recognition of deferred tax assets in foreign jurisdictions in the second quarter.
Loss per share for the first nine months of fiscal 2024 was $6.53 compared to a loss per share of $3.36 in the year-ago period, an increase in loss per share of $3.17. Adjusted EPS decreased 24.9%, or 83 cents to $2.49, reflecting a decrease of 25.3% on a constant currency basis.
U.S. retail pharmacy segment:
The U.S. retail pharmacy segment had third quarter sales of $28.5 billion, an increase of 2.3% from the year-ago quarter driven entirely by comparable pharmacy sales, partly offset by a retail decline. Comparable sales increased 3.5% from the year-ago quarter.
Pharmacy sales increased 4.4% and comparable pharmacy sales increased 5.7% compared to the year-ago quarter, benefiting from higher branded drug inflation and script growth. Comparable prescriptions filled in the third quarter, adjusted to 30-day equivalents increased 1.6% from the year-ago quarter while comparable prescriptions excluding immunizations increased 1.7%. Total prescriptions filled in the quarter, including immunizations, adjusted to 30-day equivalents was 306.4 million, an increase of 0.5% versus the prior year quarter. Pharmacy margin was negatively impacted by brand mix impacts and reimbursement pressure.
Retail sales decreased 4% and comparable retail sales decreased 2.3% compared with the year-ago quarter, reflecting a challenging retail environment and continued channel shift. Retail margin was negatively affected by increased promotional activity and higher shrink levels.
Adjusted operating income decreased 47.9% to $501 million compared to $1 billion in the year-ago quarter, reflecting lower sale and leaseback gains, a challenging retail environment and reimbursement pressure, net of procurement savings, partly offset by cost savings initiatives.
International segment:
The International segment had third quarter sales of $5.7 billion, an increase of 2.8% from the year-ago quarter, including a favorable currency impact of 1.1%. Sales increased 1.6% on a constant currency basis, with the Germany wholesale business growing 4.9% and Boots UK sales growing 1.6%.
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Boots UK comparable pharmacy sales increased 5.8% on a constant currency basis compared with the year-ago quarter. Boots UK comparable retail sales increased 6% on a constant currency basis compared to the year-ago quarter with growth across all categories, and increased total retail market share. Boots.com continued to perform strongly with sales growing 13.8% representing 15.6% of Boots total retail sales.
Adjusted operating income decreased 15.8% to $175 million, a decrease of 16.6% on a constant currency basis compared with the year-ago quarter, due to lapping real estate gains in the year-ago period.
U.S. healthcare segment:
The U.S. healthcare segment had third quarter sales of $2.1 billion, an increase of 7.6% compared to the year-ago quarter, led by VillageMD and Shields. VillageMD grew 7%, reflecting additional lives in risk and fee-for-service. Shields grew 24%, driven by growth within existing partnerships.
Operating loss was $220 million compared to an operating loss of $522 million in the year-ago quarter. Adjusted operating loss, which excludes certain costs related to amortization of acquired intangible assets and stock compensation expense, was $22 million compared to $172 million in the year-ago quarter.
Adjusted EBITDA was $23 million, improved by $136 million versus the prior year quarter and represents the second consecutive quarter of positive adjusted EBITDA for the segment, driven by cost discipline and growth from VillageMD and Shields.
WBA lowered its fiscal 2024 adjusted EPS guidance to $2.80 to $2.95 reflecting challenging pharmacy industry trends and a worse-than-expected U.S. consumer environment.