Walgreens Reports Profit Decline but Sales, Guidance Rise

By Lisa Beilfuss 

Walgreens Boots Alliance Inc. said sales increased 14% in its latest quarter and the company bumped up its full-year guidance, though profit declined as the largest pharmacy chain in the U.S. came up against a tough comparison.

The Deerfield, Ill., company in October struck a $9.4 billion deal to buy America's third-biggest pharmacy chain Rite Aid Corp. in a move to more than double its store count. That deal, which is under regulatory review by the Federal Trade Commission, is still expected to close in the second half of this year, Walgreens said Tuesday.

The deal is part of a broader consolidation in the drugstore space, as pharmacies face lower reimbursement rates from health insurers and the federal government in addition to growing competition from the likes of Wal-Mart.

Walgreens said Tuesday that profit in its most recent quarter fell to $930 million, or 85 cents a share, down from year-earlier earnings of $2.04 billion, or $1.93 a share -- a tough comparison because of a gain of $814 million, or 77 cents a share, related to its 2014 deal to buy the chunk of Europe's Alliance Boots GmbH that it didn't already own.

Excluding the merger-related gain, among other items, per-share profit rose to $1.31 from $1.18. Analysts anticipated $1.28 in adjusted earnings per share.

Thanks in large part to the acquisition, overall sales at Walgreens jumped 14% from a year earlier to $30.18 billion as sales at stores open at least a year rose 2.2% from a year earlier. Pharmacy sales, which represent about two-thirds of the top line, rose 3.2% as the company filled 233 million prescriptions, up 3.9% from a year earlier despite a weak cold and flu season. Analysts expected $30.66 billion in total sales for the quarter. Walgreens said adverse foreign exchange rates shaved 2.4% off its top line.

For the fiscal year ending in August, the company projects $4.35 to $4.55 in adjusted earnings per share. Earlier, the low end of that range was $4.35. Analysts have projected $4.48 a share.

Chief Executive Stefano Pessina said Tuesday that the company is making good progress on its efforts to mitigate lower pharmacy reimbursement rates and a challenging retail sales environment. In its latest bid to capture a bigger piece of the prescription drug market, Walgreens last month agreed to a deal with UnitedHealth Group Inc.'s OptumRx by which OptumRx will charge its customers, including employers and insurers, less for certain drugs if patients fill their prescriptions at Walgreens stores.

Shares in the company, up 1.4% this year through Monday's close, were inactive premarket.

Write to Lisa Beilfuss at [e-mail]

(END) Dow Jones Newswires

April 05, 2016 07:57 ET (11:57 GMT)

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