WBA posts Q1 results

In announcing financial results for Walgreens Boots Alliance's first quarter of fiscal 2024, which ended Nov. 30, 2023, Tim Wentworth, CEO of Walgreens Boots Alliance, said, "WBA delivered fiscal first quarter results in line with overall expectations, reflecting disciplined execution in a challenging consumer backdrop."

Wentworth continued, “We are evaluating all strategic options to drive sustainable long-term shareholder value, focusing on swift actions to right-size costs and increase cash flow, with a balanced approach to capital allocation priorities. Today we are announcing a 48% reduction in our quarterly dividend payment, while maintaining a competitive yield. We are proud to be a trusted and independent partner of choice, delivering healthcare to millions of people. And, we will leverage our local, convenient presence to engage with patients and help payors, providers, and pharma companies also achieve better health outcomes at an affordable cost."

WBA’s first quarter sales increased 10% from the year-ago quarter to $36.7 billion, an increase of 8.7% on a constant currency basis, reflecting sales growth in the U.S. Retail Pharmacy and International segments, and sales contributions from the U.S. Healthcare segment.

WBA’s first quarter operating loss was $39 million compared to an operating loss of $6.2 billion in the year-ago quarter. Year over year improvement in operating loss is due to lapping the $6.5 billion pre-tax charge for opioid-related claims and litigation recorded in the year-ago quarter, the company said. Adjusted operating income was $687 million, a decrease of 33% on a constant currency basis reflecting softer U.S. retail market trends, partly offset by improved profitability in U.S. Healthcare and International growth.

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Net loss in the first quarter was $67 million compared to a net loss of $3.7 billion in the year-ago quarter. Net loss in the first quarter included $278 million after-tax charge for fair value adjustments on financial derivatives related to forward sale of Cencora shares. Year over year improvement in net loss is primarily driven by higher operating income, partially offset by lapping the $.9 billion post-tax gain from the partial sale of the company's equity method investment in Cencora in the year-ago quarter. Adjusted net earnings decreased 43.1% to $571 million, down 43.7% on a constant currency basis, reflecting lower adjusted operating income and a higher adjusted effective tax rate primarily due to lapping of a valuation allowance release related to capital loss carryforwards in the year-ago quarter.

Loss per share in the first quarter was 8 cents compared to loss per share of $4.31 in the year-ago quarter. Adjusted earnings per share decreased 43.1% to 66 cents, reflecting a decrease of 43.7% on a constant currency basis.

Net cash used for operating activities was $281 million in the first quarter. Operating cash flow was negatively impacted by an anticipated inventory build for the U.S. and UK holiday season and timing of payor reimbursement. Free cash flow was negative $788 million, a $671 million decrease compared with the year-ago quarter primarily driven by phasing of working capital and lower earnings. Capital expenditures decreased by $104 million compared to the year-ago quarter.

U.S. retail pharmacy

The U.S. retail pharmacy segment had first quarter sales of $28.9 billion, an increase of 6.4% from the year-ago quarter. Comparable sales increased 8.1% from the year-ago quarter.

Pharmacy sales increased 10.7% compared to the year-ago quarter. Comparable pharmacy sales increased 13.1% in the quarter compared to the year-ago quarter, benefiting from higher branded drug inflation and strong execution in pharmacy services, the company said. Comparable prescriptions filled in the first quarter increased 1.3% from the year-ago quarter while comparable prescriptions excluding immunizations increased 1.8%, impacted by lower market growth due to a weaker flu and respiratory season, and Medicaid redeterminations. Total prescriptions filled in the quarter, including immunizations, adjusted to 30-day equivalents was 311.6 million, flat versus the prior year quarter.

Retail sales decreased 6.1% and comparable retail sales decreased 5% compared with the year-ago quarter, reflecting macroeconomic-driven consumer trends, a 160 basis point direct impact from a weaker flu and respiratory season, and Thanksgiving holiday store closures.

Adjusted operating income decreased 37.2% to $694 million compared to $1.1 billion in the year-ago quarter, reflecting a weaker flu and respiratory season, lower retail sales and continued pharmacy reimbursement pressure net of procurement savings. The decrease was partly offset by execution in pharmacy services and cost savings, the company said.

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International

The International segment had first quarter sales of $5.8 billion, an increase of 12.4 % from the year-ago quarter, including a favorable currency impact of 8%. Sales increased 4.4% on a constant currency basis, with Boots UK sales growing 6.2% and the Germany wholesale business growing 3.7%.

Boots UK comparable pharmacy sales increased .8% compared with the year-ago quarter. Boots UK comparable retail sales increased 9.8% compared to the year-ago quarter with growth across all categories and formats, and increased total retail market share for the 11th consecutive quarter. Boots.com continued to perform strongly with sales growing 17.5%, representing over 19% of Boots total retail sales.

Adjusted operating income increased 22.3% to $142 million, an increase of 15% on a constant currency basis compared with the year-ago quarter, led by strong retail sales in the UK partially offset by inflationary cost pressures.

U.S. Healthcare

The U.S. Healthcare segment had first quarter sales of $1.9 billion, reflecting the acquisition of Summit Health by VillageMD, and growth in all businesses compared to the year-ago quarter. On a pro forma basis, the segment's businesses grew sales at a combined rate of 12% in the quarter, led by VillageMD and Shields. VillageMD grew 14% on a pro forma basis, reflecting same clinic growth, additional full-risk lives, and increased multi-specialty productivity. Shields grew 27%, driven by recent contract wins and further expansion of existing partnerships.

Operating loss was $436 million, flat versus the year-ago quarter. Adjusted operating loss, which excludes certain costs related to stock compensation expense and amortization of acquired intangible assets, was $96 million compared to $152 million in the year-ago quarter.

Adjusted EBITDA loss of $39 million improved by $84 million versus the prior year quarter reflecting growth across all businesses and cost discipline.

WBA said it is maintaining fiscal 2024 adjusted EPS guidance of $3.20 to $3.50, with underlying earnings growth more than offset by lower sale and leaseback contribution, a higher tax rate and lower COVID-19 contribution. The company is maintaining U.S. healthcare adjusted EBITDA to be breakeven at the midpoint of the guidance range of ($50) million to $50 million.