Walgreens’ earnings top expectations while store closures, layoffs weigh on profitability

A pedestrian passes in front of a Walgreens Boots Alliance Inc. store in the Hollywood neighborhood of Los Angeles, California.

Christopher Lee | Bloomberg | Getty Images

Walgreens Boots Alliance‘s fiscal fourth-quarter profit slid 55% as the company spent more to shutter unprofitable locations and scaled back its tobacco sales.

Still, the drop in its earnings per share wasn’t as bad as expected after adjusting for one-time expenses and other issues. Revenue also topped Wall Street estimates.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.43 adjusted, vs. $1.41 expected
  • Revenue: $33.95 billion vs. $33.89 billion expected

Walgreens’ net income slid 55% to $677 million, or 75 cents per share, during its fiscal fourth quarter, down from $1.51 billion, or $1.55 per share a year earlier. Walgreens attributed the drop in profit to expenses associated with its cost-cutting program.

Excluding those expenses, currency exchange rates and other items, Walgreens earned $1.43 per share, above the $1.41 analysts surveyed by Refinitiv expected.

Walgreens now plans to cut more than $1.8 billion by fiscal year 2022, up from the previously announced $1.5 billion. The company already said it will close 200 Walgrens stores in the U.S. and 200 Boots stores in the U.K.

For fiscal year 2020, Walgreens forecasts adjusted earnings to be roughly flat after adjusting for fluctuations in currency exchange rates.

“While we still face headwinds, I am encouraged by the improvement in U.S. comparable sales performance in the second half of fiscal 2019 and our progress in managing costs in order to save to invest to grow,” Walgreens CEO Stefano Pessina said in a statement.

In the fiscal fourth quarter, comparable sales in Walgreens’ U.S. retail pharmacy business increased 2.1% to $26 billion. Pharmacy sales drove the bulk of the increase. The company attributed the 4.2% sales increase to higher drug prices and dispensing more medications.

Comparable store sales of nonpharmacy products declined 1.2%. The company attributed the decline “entirely” to its de-emphasis of tobacco products. Rival CVS stopped selling tobacco in 2014. Walgreens has stopped short of removing the products altogether, instead making them less prominent in its stores.

Shares of the company rose 0.5% in premarket trading.

Walgreens shares have fallen nearly 19% this year as the drugstore chain struggles to convince investors it has a plan to compete with old rivals like CVS and new ones like .

Walgreens recently announced a partnership with ‘s Wing to test using drones to deliver nonprescription items like groceries and over-the-counter medicines. That’s in addition to the more than one dozen partnerships Walgreens has already made to bring new services to its drugstores, such as dental and doctors offices.

Following the earnings release, Walgreens announced a partnership with weight-loss company Jenny Craig to open 100 Jenny Craig locations inside Walgreens stores in January.

Read the full earnings release here.

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