Walgreens Boots Alliance might have been expected to a coronavirus winner when it posts its third-quarter earnings on Thursday, but instead the drug store giant has spent the year battling leaner rivals.
The chain is forecast to post a 0.9% decline in revenues to $34.3bn, but a more substantial 19% drop in profits to $1.19 per share, according to analysts.
This contrasts with its second-quarter results in April when, Walgreens saw sales rise as customers in March stocked up on drugs, cleaning supplies and toilet paper as they prepared for lockdown measures.
Sales lifted to a better-than-expected $35.8bn, up 3.7% on a year ago, but second-quarter adjusted earnings per share came in at $1.52, down from $1.64 a year earlier.
Walgreens boss: coronavirus impact ‘uncertain’
Chief executive Stefano Pessina (pictured) said while the company’s results were better than forecast “it is too early to know what the net impact of the Covid-19 pandemic will be on our performance for the year.”
The Deerfield, Illinois-based firm added that before the pandemic, it was on course to turn in “flat growth in adjusted earnings per share”. But it said the “future impact” of the health crisis was “uncertain” and would provide a fuller update in this week’s earnings report.
The group, which has over 18,750 stores in the US, Europe and Asia, in recent years has struggled as lower-priced generic drugs and a decline in reimbursement rates for medications from state and federal government health care plans have weighed on margins.
Walgreens, like rivals Rite Aid and CVS, has also been hurt by increased pharmacy competition from Walmart and Amazon, which now owns online pharmacy PillPack.
This tough environment saw Pittsburgh-based health and wellness chain GNC, file for Chapter 11 bankruptcy protection last month, adding that it plans to close between 800 and 1,200 stores.
Analysts at Zacks point out that “fierce competition and tough industry conditions are concerns” about Walgreens. It also adds that by the middle of June, shares in Walgreens have underperformed its industry over the last six months, down 26.3%, compared with the broader industry’s fall of 17.6%.
Walgreens said in April it “will provide further updates in the next earnings report when both the potential positive and negative effects of the pandemic will be known in more detail”.
Wall Street will pay attention to what the retail giant plans to do next.