Walgreens Gets a Boost From Covid

As Omicron rages on across the globe, Walgreens Boots Alliance Inc WBA saw its shares rise nearly 3% on Thursday as the company's fiscal first-quarter earnings were lifted by Covid-19 vaccines and both in-person and at-home tests, exceeding analyst estimates. Guided by the positive momentum, the drugstore chain raised its fiscal 2022 guidance.

Fiscal first-quarter results

The company administered 15.6 million Covid vaccines over the quarter that ended on November 30^th, accelerating from the previous quarter's 13.5 million, bringing its total to over 56 million to date with over 9 million being booster shots. Total tests amounted to 6.5 million and along with Amazon.com, Inc AMZN and CVS Health Corporation CVS, the number of home-test kits one can buy has been limited. Overall revenue rose from last year's $31.44 billion to $33.90 billion, also bringing net income up from last year's loss of $308 million to $3.58 billion, or $4.13 per share. However, this loss was largely owed to a one-time charge of $1.5 billion. Excluding items, earnings amounted to $1.68 per share, topping the $1.33 that Refinitiv survey of analysts expected.

Trends

Pandemic-related items also contributed to greater sales as shoppers as home test kits were often accompanied by cough, cold, and flu medications, as well as beauty items. Moreover, retail same-store sales recorded the largest jump in more than two decades as they rose 10.6% compared to last year's comparable quarter. The United Kingdom branch, Boots, retail stores that were open for at least a year and online sales combined grew 16.3% as digital sales almost doubled versus the pre-pandemic comparable quarter but foot traffic went the other way. Digital sales in the U.S. surged by 88% over the quarter as customers placed 3.6 million same-day pickup orders.

Fiscal 2022 guidance

Instead of flat adjusted per-share earnings, the drugstore chain is now guiding for low single-digit growth to reflect first-quarter performance and continued positive momentum.

Post-pandemic outlook

Strong demand for COVID-19 vaccinations and testing fueled sales at its pharmacy stores and helped Walgreens swing to profit. But the question remains how Walgreens drives growth beyond the pandemic will. Its competitor, CVS plans to offer more healthcare services and new store formats to build on its pandemic gains. While CVS is well-positioned to help fix a broken healthcare system that is a great source of frustration for customers and governments as it keeps increasing in cost without delivering desired outcomes, Walgreens remains mostly silent regarding its future plans, although according to Sunday Times and Sky News, it is considering selling its Boots business to private equity firms. This hasn't been confirmed by management that only said the company renewed its 2022 priorities with aims to further its position in healthcare and beauty.

It's no secret that COVID has entirely reshaped the beauty and healthcare business but also brought on new "opportunities", such as mental health which is an unmet need and one of the biggest collateral damages of the pandemic. Therefore, new strategies, rebrandings, repositionings and perhaps even new ways of doing business are likely on the horizon.

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