Walgreens Stock Sinks To 27-Year Lows Amid Weak Consumer Demand
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Key Takeaways
Walgreens Boots Alliance’s third-quarter profit fell short of estimates, and the company cut its outlook because of what it called a “difficult operating environment.”
The big pharmacy chain and healthcare provider also planned changes to its U.S. Healthcare segment and said it would close “certain underperforming stores.”
Shares of Walgreens fell to levels not seen since 1997.
Walgreens Boots Alliance (
WBA
) shares crashed to their lowest level since 1997 on Thursday as the big pharmacy chain and healthcare provider missed profit estimates, slashed guidance, and planned major location closings because of weak consumer demand.
Walgreens reported third-quarter adjusted
earnings per share (EPS
) of $0.63, short of forecasts. Revenue was up 2.6% year-over-year to $36.4 billion, better than expected.
Revenue at the U.S. Retail Pharmacy segment rose 2.3%, with pharmacy sales advancing 4.4% on higher drug prices and prescriptions written. However, the company noted that pharmacy
margins
were “negatively impacted by brand mix impacts and reimbursement pressure.”
In addition, retail sales slipped 4.0%, which the company blamed on a “challenging retail environment and continued channel shift,” with margins pulled down by increased promotional activity and higher levels of theft. U.S. Healthcare sales jumped 7.6%, while international sales gained 2.8%.
CEO Says Walgreens Faces ‘Difficult Operating Environment’
Chief Executive Officer (CEO
) Tim Wentworth said Walgreens continued to face “a difficult operating environment, including persistent pressures on the U.S. consumer and the impact of recent marketplace dynamics which have eroded pharmacy margins.”
The company said because of “challenging pharmacy industry trends and a worse-than-expected U.S. consumer environment,” it cut its full-year adjusted EPS to a range of $2.80 to $2.95, down from the previously anticipated $3.20 to $3.35.
Walgreens also updated its strategic review, noting it is “simplifying and focusing the U.S. Healthcare portfolio,” and plans to “close certain underperforming U.S. stores.” Wentworth told
The Wall Street Journal
that a “meaningful percent” of its unprofitable stores could be shuttered in the next few years.
Shares of Walgreens Boots Alliance sank about 25% to $11.79 as of 11:08 a.m. ET Thursday and have lost more than half their value so far this year.
