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Jan 8, 2020

Walgreens earnings slide as it faces more competitors

Pedestrians pass in front of a Walgreens store in San Francisco.

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Walgreens Boots Alliance Inc. shares declined after the drugstore giant posted first-quarter results that fell well short of Wall Street expectations, deepening a slump that saw the retailer trail the wider stock market by a substantial margin in 2019.

Walgreens shares fell as much as 6.2 per cent on Wednesday in New York. In 2019, the stock declined 14 per cent, compared with a gain of nearly 29 per cent for the S&P 500 Index.

Key Insights

  • Adjusted earnings per share of US$1.37 were lower than the US$1.41 expected by analysts, on average. Net income fell sharply from a year earlier. Walgreens affirmed its 2020 guidance for roughly flat earnings.
  • Comparable retail-pharmacy sales in the U.S. were up 1.6 per cent from a year earlier, short of the growth analysts expected, amid intense competition from discount stores and internet retailers like Inc.
  • Profit margins in Walgreens’ flagship U.S. pharmacy business were eroded by reimbursement pressure, the company said. Gross profit declined 5.2 per cent year over year.
  • In November, Walgreens was reported to be weighing a potential deal to take the company private that could be the largest leveraged buyout ever. It hasn’t indicated it is any closer to such a move.
  • Online competitors have chipped away at sales of household and beauty items. While rival CVS Health Corp. is becoming a vertically integrated health-care giant, Walgreens has doubled down on retail