WBA's Q4, full year meet expectations

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WBA's Q4, full year meet expectations

By David Salazar - 10/15/2020

Even amid a pandemic, Walgreens Boots Alliance manged to deliver fourth-quarter and full-year results near the top of its projections, due largely to the strength of Walgreens in the United States. 

For the fourth quarter, WBA saw net earnings decrease by 44.9% to $373 million year over year, with earnings per share down 42.8% to 43 cents — both of which the company attributed to a 46-cent adverse impacts of the COVID-19 pandemic, lower U.S. pharmacy gross profit and year-on-year bonus charges. At the same time, the company has been working to turn around Boots U.K. while expanding its omnichannel efforts in the United States and expanding in China. Between a partnership with DoorDash, personalization efforts and more pick-up options, the company noted that Walgreens pick-up use more than doubled from the third quarter. Additionally, the company has conducted more than 1 million COVID-19 tests across 440 sites in 49 states. 

“I am pleased to report results that came in at the high end of our expectations as we continue to adapt and transform our business model to changing customer needs. Despite uncertainty amid the global COVID-19 pandemic, we are seeing gradual improvement in key U.S. and UK markets and continued strong performance in our wholesale business,” said WBA executive vice chairman and CEO Stefano Pessina said. “I'm also encouraged by the accelerating growth in our e-commerce platforms. Now, more than ever, our pharmacy-centered business is at the heart of community healthcare and we are expanding on that role for the future. I continue to be inspired by the tireless efforts of our teams as they support and care for our customers, patients and communities, while accelerating progress on our clear set of strategic priorities. Looking ahead, we are projecting adjusted EPS growth in fiscal 2021, as reflected in our new guidance."

Operating income for the full year decreased 26% to $650 million. In the full-year period, WBA’s net earnings decreased 88.5% to $456 million, with net earnings per share down 88% to 52 cents compared with a year ago. Again, the pandemic played a factor, contributing an adverse impact of roughly $1.06, accompanied by lower U.S. pharmacy gross profit and year-on-year bonus changes. In both cases, the company’s transformational cost management program partially offset the decreases. For the year, sales were up 2% at $139.5 billion, and operating income decreased by 73.7% to $1.3 billion, which includes an adverse COVID-19 impact of $1.3 billion. 

WBA’s retail pharmacy USA segment saw fourth-quarter sales increase 3.6% year over year to $27 billion, which it said reflected the impact of store closures, improved retail sales and higher script volume. Comparable-store sales were up 3.6% year over year. Prescriptions filled were up 1.6% over the prior-year period and marked a 3.2 percentage point increase over the third quarter, totaling 287.6 million scripts, including immunizations, adjusted to 30-day equivalents. Pharmacy sales comprised 75.6% of the division’s sales and were up 4.2% year over year with pharmacy comps up 3.2%. Comparable retail sales were up 4.7% from the prior-year period, buoyed by 15% growth in health and wellness and 8% growth in personal care, both slightly offset by the beauty category’s 3% contraction. The company said that Walgreens’ mass personalization efforts drove a 140-basis-point increase in retail sales. 

On the international side, fourth-quarter sales decreased 14.9% year over year. At Boots UK, comparable retail sales were down 29.2% from the previous year’s Q4 on a constant-currency basis due to decreased foot traffic during the pandemic, particularly in major high street, train station and airport locations. Comparable pharmacy sales at Boots were up 0.4% ona. constant-currency basis and gross profit was down 24.7% compared with the prior-year period. Operating income for the segment was down $181 million from a year ago due to an operating loss of $132 million, primarily due to retail sales in the United Kingdom. Beyond Boots, Chinese chain GuoDa, in which Walgreens has a minority stake, has more than doubled its store count from when Walgreens took its stake in 2018. 

With regard to pharmaceutical wholesale, fourth-quarter sales were $6 billion, up 4.3% from a year ago. Operating income for the segment was $124 million, including $57 million from WBA’s equity stake in AmerisourceBergen. 

As it looks forward, the company said it would continue to accelerate its Boots UK turnaround while advancing WBA’s omnichannel capabilities, including an enhanced customer loytalty program called myWalgreens and expanded pick-up options. The company also is continuing to leverage its investment in VillageMD, with plans to open between 500 and 700 full-service doctor’s offices over the next five years. WBA also said it would be continuing to implement its cost management plan and expand COVID-19 testing capabilities. 

For fiscal 2021, WBA said it expects low single-digit growth in adjusted earnings per share at constant currency rates.