Walgreens Boots Alliance revenue stalls in Q1 2017

By Lucy Tandon Copp 5-Jan-2017

The US pharmacy retail giant saw net earnings fall 5% year-on-year, however, it has raised the lower end of its guidance for fiscal year 2017 by 5 cents

Walgreens Boots Alliance owns and operates Boots pharmacy

After posting healthy Q4 results in 2016, Walgreens Boots Alliance has reported a drop in revenue and profit in Q1 2017.

The pharmacy retail giant saw net earnings decrease 5% from Q1 2016 to $1.1bn, while sales dropped 1.8% to $28.5bn. Profit was down from $1.11bn to $1.05bn.

However, Executive Vice Chairman and CEO Stefano Pessina said that overall the company was “pleased” with the progress and that they were still in line with expectations.

Unphased, Walgreens said that growth is forecast for the H2 2017, boosted by new strategic pharmacy partnerships announced last year.

Pessina confirmed that as a result of this, the company has raised the lower end of its fiscal year guidance by 5 cents per share, resulting in forecast adjusted net earnings per share of $4.90 to $5.20 for fiscal year 2017.

International retail struggles

While Walgreens’ retail pharmacy USA division saw sales increase 1.4% compared with Q1 2016 to $20.7bn, international sales struggled.

The retail pharmacy international division saw Q1 2017 sales plummet 14.4% year-on-year, to $3bn.

Walgreens put this partially down to the negative impact of currency translation; on a constant currency basis sales grew 0.5%.

However, another hurdle materialised in pharmacy sales due to a reduction in government pharmacy funding in the UK.

Rite Aid takeover

Walgreens’ acquisition of Rite Aid is still pending as discussions with the antitrust regulator Federal Trade Commission (FTC) continue.

In December 2016, Walgreens agreed to sell 865 Rite Aid stores to Fred’s Pharmacy for $950m in cash.

At the time, Walgreens stated: “The agreement is being entered into to respond to concerns identified by the FTC in its review of the proposed acquisition of Rite Aid by Walgreens Boots Alliance, which was announced in October 2015.”

The transfer would make Fred’s Pharmacy one of the largest drugstore chains in the US.

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The acquisition was announced in October 2015 and Walgreens stated that it is on track to complete in the “early part” of this calendar year; in October 2016, however, the company said it would close in January 2017.