(Bloomberg) -- Walgreens Boots Alliance Inc. maintained its guidance for 2022 earnings even as the drugstore chain beat Wall Street’s estimates for fiscal third-quarter profit and revenue, another hiccup after it abandoned the planned sale of its UK pharmacy unit.
Adjusted earnings were 96 cents a share, Walgreens said Thursday in a statement, compared with the average estimate of 94 cents, and sales of $32.6 billion also beat expectations. The company kept its outlook for low-single digit earnings growth. The shares fell as much as 5.6% as of 1 p.m. in New York, the most intraday in a month, after losing 22% this year through Wednesday.
Chief Executive Officer Rosalind Brewer’s strategy for Walgreens is under scrutiny after the company abandoned its planned sale of the UK Boots chain, expected to bring more than $6 billion, saying it failed to get the desired value. The decision to hang on to Boots is likely to impact the company negatively in the longer term, according to Raymond James analyst John Ransom.
Walgreens is retaining “a structurally declining drugstore asset that failed to attract suitors at a price it wanted,” Ransom said in a note.
Interest in Boots was high from about eight to 10 companies back in early January, but fizzled as the “market began to turn on us,” Brewer said on a conference call with analysts. The chain’s sale was only one part of the strategic review of the business, and there are “other opportunities that we can look at in here,” she said.
The company has been looking to invest in its Walgreens Health unit, which is bringing more direct patient care into its stores. The newly formed business posted quarterly revenue of $596 million, and Walgreens is diving deeper, adding primary-care centers to its US locations and partnering with health insurers. The company also launched a clinical trial business designed to help improve diversity in drug trials by making them more accessible to patients. The move signaled that Walgreens is moving deeper into the healthcare space.
“We are going to stay bullish about moving forward on Walgreens Health and making sure that our investments are prioritized in that direction,” Brewer said.
Covid vaccinations and tests continued to attract U.S. consumers to Walgreens’ drugstores, as the company administered 4.7 million vaccinations and 3.9 million tests in the third quarter. Over 16 million boosters administered have been administered to date.
“Pharmacy fundamentals remaining challenging and management will need to prove that its strategy to focus on building out services can accelerate EPS growth in a post-pandemic world,” said Jonathan Palmer, an analyst at Bloomberg Intelligence.
A quarterly operating loss from continuing operations of $320 million reflected a $683 million charge for a settlement with the state of Florida related to the company’s alleged role in the opioid crisis.
(Adds comments from Brewer and analysts from fourth paragraph)
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