Walgreens Stock Suffers Potential Worst Day after the “Most Difficult Quarter” Ever

Shares of Walgreens Boots Alliance Inc plummeted 12 percent on Tuesday, leading to what might be the lowest close for the company since 2014.  The dismal numbers came after the company reported that fiscal second-quarter earnings missed expectations, which led to the slashing of its full-year outlook.  

As a matter of fact, Walgreens Boots Alliance Inc Chief Executive Stefano Pessina said this quarter is “the most difficult quarter we have had since the formation of Walgreens Boots Alliance.”

Overall, net income for Walgreens Boots Alliance fell from $1.35 billion to $1.16 billion. This is the equivalent of a drop from $1.36 to $1.24 per share, from the same period one year ago.  The numbers reflect an adjusted EPS—not including nonrecurring items—in 5.4 percent decline; to $1.64, notably lower than the $1.72 they had expected. 

In an earnings call with analysts, on Tuesday, Pessina advised, “A number of trends we had been expecting and preparing for impacted us significantly more quickly than we had anticipated.”  He also cited “increased reimbursement pressure in the quarter, lower generic deflation, lower brand inflation, and lower-than-anticipated benefits from our work to refresh and renew our retail offering, primarily in the US.”

Now, it should also be noted that Walgreens Boots Alliance sales did grow: more than 4.5 percent, to $34.53 billion.  Even with growth, though, this number is still lower than what had been anticipated.  On the other hand, same-store retail sales—in the United States—fell nearly 4 percent. Walgreens blamed this drop on a weaker cough/cold/flu season as well as lower tobacco sales and lower seasonal merchandise sales.  

One place where Walgreens Boots Alliance did see major growth was US pharmacy sales.  This metric accounted for more than 70 percent of the company’s US sales for the quarter. This is an impressive increase of 9.8 percent when compared with the same quarter one year ago.  

All this in mind, then Walgreens now expects to see full-year earnings, for 2019, to remain flat versus the previous forecast of between 7 and 12 percent growth.  To assist with growth, too, the company said it has plans to cut more than $1.5 billion in costs by fiscal year 2022. This is 50 percent higher than the previously planned $1 billion increase.