Walgreens profits decline due to lower COVID vaccine demand and weak consumer spending, leading to reduced full-year expectations.
Walgreens Boots Alliance’s profits fell Tuesday compared to the same day last year due to less demand for Covid vaccinations and sluggish consumer spending.
For the third quarter of its fiscal year, the pharmacy chain recorded earnings of $118 million, or 14 cents per share, down from $289 million, or 33 cents per share, in the same time a year earlier.
The stock price of the corporation fell by about 10% on Tuesday.
Additionally, the company has reduced its full-year expectation from $4.45 to $4.65 per share to $4.00 to $4.05 per share due to “challenging macroeconomic and consumer conditions, as well as lower COVID-19 vaccine and testing volumes.”
CEO Rosalind Brewer said in a statement that the company’s new projections reflect “an appropriately cautious forward view” in light of consumer spending uncertainties while still showing “clear drivers of a return to operating growth” in the coming fiscal year.
She went on to say, “I am confident that our turnaround strategy positions Walgreens (WBA) to drive sustainable core growth and deliver long-term shareholder value,” and that the company was increasing its cost-saving efforts to $4.1 billion and “taking immediate actions to optimize profitability for our U.S. Healthcare segment.”
The company reports that the segment’s comparable sales, or sales at stores open at least a year, rose by 7% to $27.9 billion, up 4.4% year over year.
Higher prices for branded drugs contributed to a 9.8 percent gain in comparable pharmacy sales, and the company’s pharmacy sales rose 6.3 percent year over year.
The amount of Covid vaccines given during the quarter fell to 0.8 million from 4.7 million a year before. The store saw a drop in sales of over-the-counter testing kits over the period.
In the third quarter, Walgreens reported that retail sales dropped by 1% and comparable sales dropped by 0.2%. Without tobacco, grocery, home, and cosmetics sales drove a 0.2% increase in comparable retail sales.
Walgreens is also exploring alternative store layouts, such as the one in Chicago that conceals the vast majority of its stock. The 2 East Roosevelt Road location once provided a standard Walgreens shopping experience, complete with a pharmacy and aisles stocked with toiletries, makeup, packaged foods, health and beauty aids, and pharmaceuticals.
Earlier last month, the same facility reopened with a significantly simplified aesthetic. Walgreens claims it is a digitally-focused, customer-centric experiment. Walgreens claims it will not work as intended to prevent theft.
However, retail experts agree that putting everything out of sight is the best approach to prevent stealing.
Global Data managing director and retail analyst Neil Saunders criticized the store as a “extremely unfriendly, utilitarian concept that has been informed by the needs of Walgreens to reduce theft and labor costs rather by serving customers.”
“Our research and visits to the store reveal a lackluster reception from both shoppers and staff,” Saunders said in a memo released on Tuesday.
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