Walgreens surges on better-than-expected US pharmacy sales
Walgreens Boots Alliance Inc. reported quarterly sales that surpassed Wall Street’s expectations, spurring the shares and easing pressure on the drugstore chain as it mulls strategic options including a sale.
Revenue came to $39 billion for the fiscal quarter ended in November, driven by higher prices for branded drugs and prescription volumes at the company’s U.S. retail pharmacy division, the company said Friday. That beat the average of analysts’ estimates, and the shares gained 27% on Friday in New York after losing two-thirds of their value last year.
Investors are still focused on whether Walgreens will pull off a transformational move such as selling itself or breaking up the business. The company is discussing being acquired by private equity company Sycamore Partners and has shopped the international Boots brand to potential bidders.
Walgreens’ pharmacy operations are stabilizing, reinforcing the strategy to prioritize that business, Chief Executive Officer Tim Wentworth said in a statement. The company is in the process of selling Village Medical, part of the VillageMD health clinic business, according to an earnings presentation, and it’s evaluating options for Summit Health-CityMD, another unit of VillageMD.
The stock has been trending down for the past decade – upping the ante for the company to make a big change. The retail business has struggled because consumers can easily buy similar products more conveniently and for less from online retailers such as Amazon.com Inc. or big-box retailers including Costco Wholesale Corp.
Adjusted earnings per share beat expectations at 51 cents a share, as did sales at the company’s international and US health-care units.
Walgreens expects retail comparable sales for the year to decline 4% to 5%, compared to the earlier outlook of 2% to 3%, Chief Financial Officer Manmohan Mahajan said on a call with analysts. On the pharmacy side, Walgreens has said it’s not getting paid enough for the prescriptions it fills and is trying to negotiate different arrangements.
The company is closing over a thousand stores and looking for other ways to bring in funds.
A previous take-private effort involving KKR & Co. in 2019 fizzled, and since then, the company has lost more than 80% of its market value.