Walgreens passes health check

Walgreens passes health check

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Walgreens Boots Alliance’s (WBA, $37.90) quarterly earnings beat Wall Street expectations as the chain saw online sales jump in the U.S. and retail sales bounce back in the fiscal third quarter. Despite this shares closed the day at $37.90, down 7.27%, Walgreens shares have lost about 21.7% since the beginning of the year. This was due to the fact ts quarterly sales declined and profits got hit by waning Covid-19 vaccination demand, heavy investments in its health-care business and an opioid settlement with Florida.

Sales fell to $32.6 billion from $34.03 billion a year earlier. The drugstore chain said earnings for the quarter ended May 31 were 33 cents a share, down from $1.38 a share in the same period a year ago. Net earnings attributable to the company were $289 million, compared with $1.2 billion last year. Walgreens has increased sales during the pandemic as customers turned to its stores for Covid vaccines and tests. That demand is fading, pushing the company to drive growth in other ways. The company administered 4.7 million vaccines in its fiscal third quarter, a sharp drop from the 15.6 million vaccines in the first quarter and the 11.8 million in the second quarter.

Global Chief Financial Officer James Kehoe explained that Covid remains the biggest unknown that will shape the drugstore’s performance. Healthcare and online option have become key options for the business, with Walgreens striking a deal with VillageMD to open hundreds of doctor offices at its stores.

Why it matters

This is another one of those key stocks which is struggling to find its feet/re-invent itself after a boom period during COVID. Walgreen clearly found success during the key vaccination period, however as life returned to some normality naturally demand tailed off. It's of no surprise then that the brand has made the push towards partnerships (VillageMD) and expanding its online options, such as curbside pickup and delivery, to try to keep customers from buying toothpaste, soap and other items from online players like Amazon (AMZN,106,21). The company said its digital options rose 25% from a year ago, on top of 95% growth in the year-earlier period.


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