Acquired Rite Aid stores help to boost Rx volume

DEERFIELD, Ill. — Walgreens Boots Alliance (WBA) reported better-than-expected earnings and revenue on Wednesday when it announced results for the second quarter of fiscal 2018, which ended February 28.

Overall, WBA earned $1.73 a share, up 27% versus a year ago. Revenue grew 12.1% to $33.02 billion. Same-store sales rose 2.4%, with comparable-pharmacy sales up 5.1%.

“Our growth strategy of increasing and consolidating volume, differentiating ourselves through value and quality of service, and controlling costs is bearing fruit across our businesses,” Stefano Pessina, WBA executive vice chairman and chief executive officer, said in a statement. “This is reflected in another good set of financial results in which we delivered the highest sales growth in eight quarters, as well as strong cash generation and record U.S. pharmacy market share. We expect to continue to grow, in part through the recent acquisition of stores from Rite Aid, and today we are raising our fiscal 2018 guidance.”

Fiscal 2018 second quarter net earnings attributable to WBA determined in accordance with GAAP increased 27.3% to $1.3 billion compared with the same quarter a year ago, while GAAP diluted net earnings per share increased 38.8% to $1.36 compared with the same quarter a year ago.

Adjusted fiscal 2018 second quarter net earnings attributable to WBA increased 16.6% to $1.7 billion, up 15.1% on a constant currency basis, compared with the same quarter a year ago. Adjusted diluted net earnings per share for the quarter increased 27.2% to $1.73, up 25.7% on a constant currency basis, compared with the same quarter a year ago.

Sales in the second quarter were $33.0 billion, an increase of 12.1% from the year-ago quarter, and an increase of 9.4% on a constant currency basis.

GAAP operating income in the second quarter was $2.0 billion, an increase of 33.9% from the same quarter a year ago. Adjusted operating income in the second quarter was $2.2 billion, an increase of 7.3% from the same quarter a year ago, and an increase of 5.9% on a constant currency basis.

GAAP net cash provided by operating activities was $2.2 billion in the second quarter, and free cash flow was $1.9 billion.

For the first six months of fiscal 2018, net earnings attributable to WBA determined in accordance with GAAP increased 2.6% to $2.2 billion compared with the same period a year ago, while GAAP diluted net earnings per share increased 11.3% to $2.16 compared with the same period a year ago.

Adjusted net earnings attributable to WBA for the first six months of fiscal 2018 increased 12.7% to $3.0 billion, up 11.6% on a constant currency basis, compared with the same period a year ago. Adjusted diluted net earnings per share for the first six months of fiscal 2018 increased 22.4% to $3.01, up 21.1% on a constant currency basis, compared with the same period a year ago.

Sales in the first six months of fiscal 2018 were $63.8 billion, an increase of 10% from the same period a year ago, and an increase of 8.3% on a constant currency basis.

Retail Pharmacy USA had second quarter sales of $24.5 billion, an increase of 12.2% over the year-ago quarter. Sales in comparable stores increased 2.4% compared with the same quarter a year ago.

Pharmacy sales, which accounted for 70.3% of the division’s sales in the quarter, increased 18.7% compared with the year-ago quarter, primarily due to higher prescription volume including central specialty and mail following the formation of AllianceRx Walgreens Prime and from the acquisition of Rite Aid stores.

Comparable-pharmacy sales increased 5.1%, primarily due to higher volume. Reimbursement pressure and generics had a negative impact on comparable-pharmacy sales growth, which was partially offset by brand inflation. The division filled 269.2 million prescriptions (including immunizations) adjusted to 30-day equivalents in the quarter, an increase of 9.1% over the year-ago quarter. Prescriptions filled in comparable stores increased 4% compared with the same quarter a year ago, primarily due to volume growth from previously announced strategic pharmacy partnerships and Medicare Part D growth.

The division’s retail prescription market share on a 30-day adjusted basis in the second quarter increased about 100 basis points over the year-ago quarter to 21.4%, as reported by IQVIA. This was the division’s highest reported quarterly retail prescription market share in the U.S.

In addition, sales in the Pharmaceutical Wholesale division rose 14.4% to $5.8 billion. Revenues from the Retail Pharmacy International division also rose 7% to $3.3 billion. Moreover, Boots UK filled 269.2 million prescriptions (including immunizations) on a 30-day adjusted basis in the quarter, reflecting an increase of 9.1% over the second quarter of fiscal 2017.