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Walgreens Slashes Profit Guidance Amid Challenging Environment for Consumers and Pharmacies
As a prominent retail pharmacy chain, Walgreens faced significant challenges in the fiscal third quarter, reporting earnings below expectations and revising its full-year profit forecast downwards. The company cited a tough environment for pharmacies and U.S. consumers as the primary reason for this revision.
Despite the challenges, Walgreens exceeded revenue projections for the quarter, driven by robust performance in its health-care division. CEO Tim Wentworth highlighted the unexpected weakness in consumer spending, emphasizing that consumers are shocked by high prices, leading to resistance even if prices are not rising. As a response, Walgreens is focusing on cost-cutting measures, including the closure of underperforming U.S. stores.
The company's fiscal 2024 adjusted earnings outlook has been adjusted to $2.80 per share from the previous $3.20 to $3.35 range. Walgreens managed to surpass revenue estimates for the quarter, particularly in the health-care segment, which is pivotal for its transformation into a major health-care entity.
Walgreens is actively reducing costs following a challenging period marked by low pharmacy reimbursements and decreased demand for Covid-related products. The company is streamlining its U.S. health-care portfolio and planning to shut down underperforming stores over several years as part of its ongoing cost-cutting initiatives.
In terms of financial performance, Walgreens reported adjusted earnings per share of 63 cents for the quarter, falling short of the expected 68 cents, while revenue reached $36.4 billion, beating the anticipated $35.94 billion. The company's net income for the quarter was $344 million, or 40 cents per share, compared to $118 million, or 14 cents per share, in the same period last year.
The U.S. health-care unit of Walgreens demonstrated strong growth, with sales up 7.6% year-over-year, driven by partnerships with primary care provider VillageMD and specialty pharmacy company Shields Health Solutions. Shields experienced a notable 24% sales increase during the period, primarily due to growth within existing partnerships catering to patients with complex conditions.
Despite these positive developments in the health-care division, the company's U.S. retail pharmacy segment saw a 2.3% increase in sales to $28.5 billion, mainly propelled by comparable pharmacy sales. However, retail sales declined by 4%, with comparable retail sales down by 2.3%, reflecting a challenging retail environment.
Walgreens' international segment, comprising over 3,000 retail stores worldwide, recorded $5.73 billion in sales for the fiscal third quarter, marking a 2.8% increase from the same period last year.
Original Article: https://www.cnbc.com/2024/06/27/walgreens-wba-earnings-q3-2024.html
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