Walgreens profits squeezed as Covid vaccine wanes, health-care investment rises


The Walgreens store at State and Randolph Streets in Chicago.
Nancy Stone | Chicago Tribune | Tribune News Service via Getty Images

Walgreens Boots Alliance‘s shares fell on Thursday as sales at stores and online bounced back but demand for Covid-19 vaccines waned.

Shares were down by about 4.5% in premarket trading, as the company reiterated its forecast for the year. Walgreens said it expects adjusted earnings per share to grow by the low single-digits. It also stressed investments it is making in its health care business, which it said will take time to pay off. 

With inflation hitting consumers’ wallets, CEO Roz Brewer said Walgreens is working with suppliers to make sure it has lower prices than competitors. She said Walgreens has historically seen stable prescription trends in an economic downturn.

“There’s a shift in calculus due to food and fuel inflation, but health and wellness will always be a priority,” she said on a call with analysts.

Plus, the company’s drugstores’ locations — which are a short walk, bus ride or drive from many customers — give Walgreens an edge as gas costs more, she said.

Here’s what the company reported compared with what analysts were expecting for the three-month period ended May 31, based on Refinitiv data:

  • Earnings per share: 96 cents adjusted vs. 92 cents expected
  • Revenue: $32.6 billion vs. $32.06 billion expected

In the quarter, net income fell to $289 million, or 33 cents per share, from $1.2 billion, or $1.38 per share, a year earlier. The sharp decline reflected a $683 million charge related to its opioid settlement with the state of Florida, a decline in U.S. pharmacy sales as it lapped a high volume of Covid-19 vaccinations a year ago and investments in its expanding health care business.

Excluding items, the company earned 96 cents per share, exceeding the 92 cents expected by analysts surveyed by Refinitiv.

Sales decreased to $32.6 billion from $34.03 billion a year earlier. Analysts were expecting $32.06 billion.

Walgreens has grown sales during the pandemic as customers turned to its stores for Covid-19 vaccines and tests. That demand is fading, pushing the company to drive growth in other ways.

The company administered 4.7 million vaccines in the third quarter, a sharp drop from the 15.6 million vaccines in the first quarter and the 11.8 million in the second quarter.

Health care has become a major push, with Walgreens striking a deal with VillageMD to open hundreds of doctor offices at its stores.

Walgreens has also expanded online options, such as curbside pickup and delivery, to try to stop customers from buying toothpaste, soap and other items from online players like Amazon. The company said its digital options gained popularity in the quarter, growing 25%, from a year ago, on top of 95% growth in the year-ago period. The growth was fueled by 2.8 million same-day pickup orders, the company said.

In the U.S. and the U.K., retail sales picked up as consumers got out and about again. Same-store sales in the U.S. rose 2.4%, excluding tobacco, and 24% for Boots U.K. retail.

Earlier this week, Walgreens said it would halt plans to sell its United Kingdom-based Boots business, citing instability in the markets. The company said in January that it was looking into strategic options for that division, including a possible sale.

As of Wednesday’s close, Walgreens shares were down about 22% so far this year. Shares close Wednesday at $40.87, bringing the company’s market value to $35.30 billion.

Read the company’s earnings release here.

This story is developing. Please check back for updates.

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