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WBA’s first quarter results surpass expectations

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Same-store sales growth highest in more than 20 years

WBA’s first quarter results surpass expectations

DEERFIELD, Ill. — Walgreens Boots Alliance far surpassed analysts’ expectations for first quarter profits, as adjusted earnings per share jumped 53.2% to $1.68. Wall Street’s consensus forecast for adjusted EPS was $1.33.

With customers flocking to stores for COVID vaccines and tests, sales for the period ended November 30 climbed 7.8% from the year-ago quarter to $33.9 billion. That easily topped analysts’ prediction of $32.7 billion.

Roz Brewer

Roz Brewer

Walgreens administered 15.6 million COVID vaccines in the quarter, bringing its total to over 56 million to date. That propelled same-store front end sales up 10.6 percent — 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 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 f 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 $0.45 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 United States segment had first quarter sales of $28.0 billion, an increase of 3.2 percent, held back by a decline in the AllianceRx Walgreens Prime business. Comparable sales increased 7.9 percent 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 percent, 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 percent. 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 percent and 11.6%, respectively.

Gross profit increased 12.6%. Adjusted gross profit increased 12.3 percent driven by strong sales growth, partially offset by reimbursement.

Selling, general and administrative expenses (SG&A) increased 6.7%. Adjusted SG&A increased 4.2%, driven by investments to support COVID-19 vaccinations and testing, and labor investments, partially offset by savings from the Transformational Cost Management program and timing benefits.

Operating income increased to $1.4 billion, compared to a net operating loss of $504 million in the year-ago quarter. Adjusted operating income increased 46.3 percent, to $1.7 billion.

The International segment had first quarter sales of $5.8 billion, an increase of 35.8 percent, including a favorable currency impact of 1.6 percent. Sales increased 34.2 percent 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 percent, reflecting the ongoing recovery in the UK market, following the lifting of COVID-19 restrictions in July.

Boots UK comparable pharmacy sales increased 8.8%, reflecting stronger demand for pharmacy services. Boots UK comparable retail sales increased 16.3 percent. Footfall improved but traffic still remains below pre-COVID-19 levels. Boots.com continued to perform well, with digital sales in the first quarter almost doubling compared with the equivalent quarter pre-COVID-19.

Gross profit increased 21.9 percent, including a favorable currency impact of 3.7%. Adjusted gross profit increased 18.2 percent on a constant currency basis, reflecting strong UK growth, and higher gross profit associated with inclusion of a full quarter of results from the company’s wholesale joint venture in Germany, partly offset by favorable timing of NHS reimbursement in the year-ago quarter.

SG&A in the quarter increased 21.1% to $1.2 billion, including an adverse currency impact of 4.0%. Adjusted SG&A increased 11.4 percent on a constant currency basis. The increase in both SG&A and adjusted SG&A reflects higher costs associated with the company’s wholesale joint venture in Germany, and COVID-19 related government support in the year-ago quarter.

Operating income grew 39.8%, including an adverse currency impact of 3.8%, to $54 million. Adjusted operating income grew strongly to $164 million, an increase of 88.6% on a constant currency basis.

In conjunction with the launch of its new consumer-centric healthcare 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 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.


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