PLMA October Leaderboard

WBA’s first quarter earnings far surpass expectations

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DEERFIELD, Ill. — Walgreens Boots Alliance’s (WBA’s) first quarter sales and profits topped Wall Street’s expectations, and its own. Customers flocking to stores for COVID vaccines and tests helped drive a 7.8% increase in sales, to $33.9 billion, for the three-month period ended November 30. That easily topped analysts’ prediction of $32.7 billion.

Adjusted earnings per share jumped 53.2% to $1.68, topping analysts’ consensus forecast of $1.33. And same-store front-end sales were up 10.6% — the highest growth in over 20 years. The strong showing led the company to raise its full-year forecast, saying it now projects adjusted earnings per share to grow in the low single-digits instead of being flat.

“First quarter results exceeded our expectations, with a very encouraging performance across all our business segments,” said chief executive officer Roz Brewer. “I am particularly excited about the progress we’re making in building out Walgreens Health. Our majority investments in VillageMD and Shields closed during the quarter, and we’re rolling out VillageMD primary care co-locations and Walgreens Health Corners at pace. The strong start to the fiscal year reinforces our confidence in the future, and as a result, we are raising our guidance for the full year and increasing investments in our people. Looking ahead, we are well positioned for sustainable, long-term value creation.”

Operating income was $1.3 billion, compared to an operating loss of $535 million a year earlier. This was partly driven by a $1.5 billion charge from the company’s equity earnings in AmerisourceBergen in the year-ago quarter. Adjusted operating income was $1.8 billion, an increase of 48.5% on a constant currency basis. The increases reflect strong adjusted gross profit growth across both pharmacy and retail in the United States and a continued rebound in International segment sales and profitability.

Net earnings from continuing operations were $3.6 billion, compared to a loss of $391 million a year earlier, reflecting a $2.5 billion after-tax gain due to the valuation of the company’s previously held minority equity and debt investments in VillageMD and Shields, and a $1.2 billion charge, net of tax, from the company’s equity earnings in AmerisourceBergen in the year-ago quarter. Adjusted net earnings increased to $1.5 billion, up 53.5% on a reported and constant currency basis. EPS were $4.13, compared with a loss of 45 cents in the year-ago quarter.

Net cash provided by operating activities was $1.1 billion, and free cash flow was $645 million, a $118 million decrease from a year earlier primarily driven by phasing of working capital, COVID-19 related government support in the year-ago quarter and increased capital expenditures.

The U.S. segment had first quarter sales of $28.0 billion, an increase of 3.2%, held back by a decline in the AllianceRx Walgreens Prime business. Comparable sales increased 7.9% from the year-ago quarter.

Pharmacy sales increased 1.1%. Excluding the AllianceRx Walgreens Prime business, sales grew 5.8%. Comparable-pharmacy sales increased 6.8% in the quarter compared to a year ago, with prescriptions filled increasing by 6.2%, including a positive impact of approximately 535 basis points from COVID-19 vaccinations.

Retail sales increased 10.1% and comparable retail sales increased 10.6%. Excluding tobacco and e-cigarettes, comparable retail sales increased 11.7%, reflecting broad-based growth across all categories. In particular, health and wellness increased 24.7% aided by at-home COVID-19 tests and cough-cold-flu, and beauty and personal care increased 16.6% and 11.6%, respectively.

In conjunction with the launch of its new consumer-centric health care strategy, in fiscal 2022, the company announced the creation of a new operating segment, Walgreens Health. The new segment had first quarter sales of $51 million resulting from the acquisition of Shields on October 29 and VillageMD on November 24.

Gross profit was $20 million, and adjusted gross profit was $20 million, both reflecting results from Shields and VillageMD. First quarter SG&A (selling, general and administrative expenses) was $65 million, and adjusted SG&A was $33 million, reflecting the two acquisitions and acceleration of investments in Walgreens Health. Operating loss was $45 million. Adjusted operating loss was $13 million.

The International segment had first quarter sales of $5.8 billion, an increase of 35.8%, including a favorable currency impact of 1.6%. Sales increased 34.2% on a constant currency basis, including higher sales associated with the formation of company’s wholesale joint venture in Germany. Excluding this benefit, International segment sales on a constant currency basis increased 8.6%, reflecting the ongoing recovery in the U.K. market, following the lifting of COVID-19 restrictions in July.


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