The Struggling Walgreens Boots Alliance Is Taking A New Direction

On Thursday, Walgreens Boots Alliance WBA reported its fiscal third quarter results and they were not good. Besides coming short of Wall Street estimates, the pharmacy chain revealed it will be closing a significant number of unprofitable stores along with pulling back on its push into primary care. Upon the release of the report, shares tanked as much as 25%.

Fiscal third quarter highlights

The third quarter results reflected the extend of Walgreens’ troubles as it faces worse-than-expected consumer spending, on top of many other challenges.

For the quarter ended on May 31s, Amazon.com Inc AMZN pharmacy rival reported revenue grew 2.6% to $36.4 billion, surpassing LSEG’s revenue estimate of $35.94 billion due to strong performance in healthcare. The U.S. health-care unit alone reported sales grew 7.6% YoY to $2.13 billion. The U.S. retail pharmacy segment also grew 2.3% as it brought in $28.5 billion. Pharmacy sales grew 4.4% but retail sales contracted by 4% amid a challenging environment. The international business grew 2.8% YoY to $5.73 billion, with the UK Boots reporting growth of 1.6%. 

Net income nearly tripled to $344 million, or $0.40 per share, reflecting better operating income. Adjusted earnings of 63 cents per share came short of LSEG’s estimate of 68 cents.

Once Again, A Lowered Full Year Guidance

The full year earnings guidance being cut for the second time. While previously forecasting a range from $3.20 to $3.35, Walgreens now expects them between $2.80 and $2.95 per share. 

Stepping Away From Primary Care 

Walgreens will no longer be VillageMD’s primary care provider as it plans to reduce its stake in the primary care provider. So much for the identity of a major provider in healthcare that the previous CEO, Rosalind Brewer, focused on creating.

However, it is not planning to give up on its overseas pharmacy chain Boots or specialty pharmacy firm, Shields Health Solutions.

Walgreens Is At A Turning Point 

 The 123-year-old company has been struggling for years with financial pressures burdening its core pharmacy business. Prescription drugs used to be a major sales driver but their revenue growth is shrinking. Pharmacies are also bleeding shoppers to online pharmacies like the one from Amazon.com and struggling with labor agitation from pharmacists. The mighty Amazon is trying to revamp its healthcare offering as it just renamed its Amazon Clinic telehealth service. But Amazon continues its quest to improve the medical care experience. 

Since last October, Walgreens got a new leader, Tim Wentworth, who made a new team of top executives and is now expected to lay out the details of the strategic pivot he is planning to navigate Walmart through. What Wentworth did state is that retail pharmacy is central to the future of Walgreens, while admitting it must undergo a significant transformation. 

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