Walgreens Shares Fall on Q3 Earnings Miss

Shares of Walgreens Boots Alliance Inc. were falling on Thursday after the pharmacy retailer reported its third quarter earnings that missed expectations.

Wall Street also wasn’t enthusiastic to learn that COVID-19 had caused a sales impairment for the retailer. The pandemic had hurt Walgreens sales by $700 million to $750 million, which was almost entirely non-U.S. business.

For the third quarter, net loss totaled $1.71 billion, or $1.95 per share, after net income of $1.03 billion, or $1.13 per share, last year. Adjusted EPS of 83 cents trailed the FactSet consensus for $1.19 per share. Sales of $34.63 billion were up slightly from $34.60 billion last year and ahead of the FactSet consensus for $34.30 billion.

he most significant impact from coronavirus was in the U.K., where sales were down 85% in April and Walgreens took $2 billion in non-cash impairment charges. The results also reflect a 61-cent-to-65-cent per share operational impairment due to the pandemic.

“Shopping patterns are evolving more rapidly than ever as consumers further embrace digital options, spurring us to accelerate our ongoing investments in digital transformation and neighborhood health destinations,” said Chief Executive Stefano Pessina in a statement.

Pessina said on the earnings call, “We made clear on our last earning call that we had only begun to see the impact of the COVID virus. In this quarter, the full extent of that impact is all too apparent [Phonetic]. COVID has impacted all of our markets. But for us, the impact has been more significant in the US and especially in the UK markets. The immediate measures to arrest the spread of the virus have fundamentally changed the way our customers have had to approach managing their health, and their daily shopping needs.”

He added, “As lockdowns and restrictions were introduced, we saw significant declines in footfall in our stores, at times, reducing to a fraction of the pre-COVID levels. At the same time, we needed to keep the majority of our locations open to help ensure the timely supply of medication and to continue the vital support we offer people in our local communities.”

“We have leveraged all the resources available to us in order to maintain our services, while ensuring adequate safeguards are in place to protect our teams and customers. As you would expect, we have seen unprecedented demand for home delivery, and for online services. The development of these services is a core strategy for us. And during the crisis, we have significantly increased our capacity to serve these demand,” he further stated.

Walgreens also had completed a $250 million equity investment this week. The company additionally said it will close 48 Boots Opticians and cut office support headcount by 20% in U.K., impacting 4,000 jobs, or about 7% of the company’s workforce.

Looking ahead, Walgreens expects 2020 adjusted EPS of $4.65 to $4.75, including $1.03 to $1.14 impact from COVID-19. The company raised its dividend 2.2% to 46.75 cents per share on Wednesday, payable Sept. 11, 2020 to shareholders of record as of Aug. 19 2020.

Shares are down about 28% so far this year.

Disclaimer: We have no position in Walgreens Boots Alliance Inc. (NASDAQ: WBA) and have not been compensated for this article.