Walgreens Boots Alliance beat expectations in Q3
Walgreens Boots Alliance beat Wall Street expectations with its third-quarter results, which reflected strong growth internationally from its German joint venture and solid sales growth in its U.S. and U.K. pharmacy operations.
For the quarter, WBA’s sales grew by 12.1% year over year to $34 billion and its earnings per share were $1.27, compared with a loss of $2.05 per share a year ago. During the quarter, the company completed its divestiture of Alliance Healthcare to AmerisourceBergen for $6.5 billion, the proceeds from which were used to pay off $3.3 billion in debt and invest in its retail pharmacy and healthcare businesses.
“This quarter’s results demonstrate continued momentum, and while challenges lie ahead, we are in a strong position to grow and innovate our core retail and pharmacy businesses for the future. We are accelerating our investments to advance our operational excellence, including technology innovations that support mass personalization, pharmacy of the future and the next phase of growth in tech-enabled healthcare. These investments are fueled by our Alliance Healthcare divestiture. I remain proud of our team members and the essential role they are playing to help end the pandemic as the communities we serve continue to turn to our trusted brands and expert pharmacists.”
WBA’s U.S. segment saw sales of $28.7 billion, up 5.1% from the prior-year quarter, with comparable-store sales up 6.4% year over year. The company said the comps growth was a combination of an 8.4% increase in comparable pharmacy sales and 1.7% growth in comparable retail sales. Comparable scripts filled grew by 9.8% over the prior period, reflecting a 600-basis-point impact from COVID-19 vaccinations. Total scripts filled were up 8.7%, including immunizations, adjusted to 30-day equivalents. Overall pharmacy sales were up 6.3% over the previous-year period. Walgreens retail sales increased by 1.4%, with comparable retail sales up 1.7%, which the company said was due to its mass personalization efforts, as well as strong beauty and photo sales amid improved traffic trends.
The company’s international segment was a particular bright spot in Q3, due in large part to the company’s wholesale joint venture in Germany, which was consolidated in November 2020. The segment saw a 75.8% increase in sales over the prior-year third quarter because of the joint venture. The sales growth also included a favorable currency impact of 17.1%. Excluding incremental sales from the joint venture, the segment saw 12.1% sales growth on a constant-currency basis. Boots UK’s comparable retail sales grew by 38.7% over the prior-year period, reflecting return of foot traffic on high streets and as lockdown measures were beginning to ease. Pharmacy sales at the U.K. pharmacy chain grew by 3.7% year over year, which the company attributed to stronger pharmacy services and favorable timing of NHS reimbursement, and noted was partially offset by lower script volume. Boots.com saw sales growth of 42.3% over the prior-year quarter.
Amid the results, WBA raised its guidance for the year, now expecting roughly 10% growth in constant-currency earnings per share.
WBA also touted its pandemic-fighting efforts, noting that through June, it has administered more than 25 million COVID-19 vaccinations and more than 8 million COVID-19 tests, including over-the-counter self-tests. In the United Kingdom, Boots has been one of the country’s testing leaders, administering more 3 million tests, largely in partnership with the NHS.
With regard to the company’s strategic priority, WBA said it has now opened 46 Village Medical at Walgreens locations, with plans to open 35 more by the end of the calendar year. It also has begun operating two micro-fulfillment centers in Phoenix and Dallas as part of its partnership with pharmacy automation provider iA. The centers currently support some 550 Walgreens stores, with expectations for them to support roughly 1,000 locations.
As its Walgreens Find Care platform grew — logging more than 135 million visits in Q3 — the company launched Boots Health Hub in the United Kingdom, offering a marketplace that serves as a gateway to Boots and third-party online healthcare services. Additionally, WBA noted that myWalgreens membership has grown to 75 million — reflecting an increase from the 56 million members it had in Q2. It also will be launching its debit and credit card offerings nationwide in the fall.