Solid performance from its American pharmacy and wholesale operations couldn’t completely buoy challenges overseas for Walgreens Boots Alliance, which reported its fourth-quarter and fiscal year 2019 results on Monday. Despite overall sales gains for the year and quarter, the company ultimately posting declines in earnings that the company said were in-line with its guidance.
“We are pleased to report fiscal 2019 results in line with our previously stated guidance despite a challenging operating environment. We are also making progress on our four strategic priorities, which we remain confident are positioning us to deliver long-term growth. While we still face headwinds, I am encouraged by the improvement in U.S. comparable sales performance in the second half of fiscal 2019 and our progress in managing costs in order to save to invest to grow. We are introducing guidance for fiscal 2020 adjusted earnings per share, which we expect will be roughly consistent with fiscal 2019 at constant currency rates — very much in line with our expectations.”
For the quarter, sales increased 1.5% to $34 billion, with earnings per share decreasing by 51.4% to 75 cents. For the year, sales increased 4.1% t total $136.9 bullion, with earnings per share decreasing by 14.6% to $4.31. For the full-year period, net earnings decreased 20.7% to $4 billion. The company’s operating income also decreased by 20.5% from the prior-year period, totaling $5 billion. In the fourth quarter, net earnings were $677 million, a decrease of 55.2% from the prior-year period. The company noted that these results reflect higher charges as Walgreens Boots Alliance undertakes its Transformational Cost Management Program. Operating income for the quarter was $878 million, down 37% from a year ago. ‘
WBA’s retail pharmacy USA segment had net sales of $26 billion in Q4, an increase of 2.1% from a year ago. Excluding the impact of store optimization following the Rite Aid store acquisition, the company noted that organic sales growth was 2.9% in the quarter, with comparable-store sales increasing by 3.4%. Pharmacy sales made up 75% of the segment’s sales and increased by 4.2% from a year ago, which the company attributed to higher bland inflation and prescription volume, as well as central specialty growth. The company’s retail prescription market share in the United States, adjusted to 30-day equivalents, decreased by roughly 55 basis points to 21%, according to IQVIA, despite the company filling 1.3% more prescriptions. WBA attributed this to the impact of store rationalization. Front-end retail sales saw a decrease of 3.9% in the quarter, with comparable retail sales decreasing by 1.2%, due to continued de-emphasis of tobacco.
WBA’s retail pharmacy international division saw sales decrease by 6.3% in the fourth quarter, totaling $2.7 billion. The company attributed this to a 4.5% adverse currency impact. It attributed the 1.8% sales decrease on a constant-currency basis to a 2.1% decline in Boots UK. Comparable pharmacy sales increased 1% on a constant-currency basis with comps up 2.7%. Gross profit for the division was down 9.9% from the prior year.
WBA’s pharmaceutical wholesale division saw fourth-quarter sales of $5.7 billion, up 3.1% over the prior-year period. Operating income for the division was $129 million, which reflected a $59 million gain from the company’s equity earnings in AmerisourceBergen.
The company also highlighted important progress for its strategic priorities — accelerating digitization, transforming and restructuring its retail offering, creating neighborhood health destinations, and its cost management efforts. It unveiled new partnerships, including with Microsoft to deliver new platforms that enable health networks and care management solutions, and expanded several other efforts. Expanded offerings include its Find Care platform, its pilot with Kroger on Kroger Express and its LabCorp in-store center partnership. The company also is building out locations focused on comprehensive health services through partnerships with national and regional partners in the United States. It also invested in specialty pharmacy provider Shields Health Solutions and digitized the Boots Advanta Card in the United Kingdom. WBA said that its cost management program is on track, and now is targeting increased annual savings in excess of $1.8 billion by fiscal year 2022.
Looking forward, WBA has issued guidance of roughly flat for fiscal year 2020 adjusted earnings per share at constant currency rates, with a range of plus or minus 3%.