Walgreens, facing challenges amidst a transition from the COVID-19 pandemic and labor pressures, reported fiscal fourth-quarter earnings that fell below expectations. The retail pharmacy giant has encountered headwinds related to declining demand for COVID-19 vaccines and tests in the U.S. The company, which recently appointed Tim Wentworth as its new CEO, saw its adjusted earnings miss Wall Street’s expectations for two consecutive quarters, a rare occurrence in nearly a decade. Despite this, Walgreens reported narrower losses and progress in cost-cutting initiatives, leading to a 7% increase in its stock.
The company provided soft profit guidance for the coming fiscal year, expecting adjusted earnings per share between $3.20 and $3.50, below analysts’ estimates of $3.72. Walgreens attributes the lower guidance to reduced COVID-related sales, a higher tax rate, and diminished sale and leaseback contributions offsetting earnings growth. Revenue expectations for the year stand at $141 billion to $145 billion, slightly below Wall Street estimates.
Interim CEO Ginger Graham highlighted the company’s ongoing cost-cutting initiatives, expecting over $1 billion in savings in the next fiscal year. Walgreens’ shift from a major drugstore chain to a larger healthcare company involves significant investments, but challenges persist, including softer consumer spending, declining demand for COVID products, and labor protests from pharmacy staff.
Despite these challenges, Walgreens reported sales growth in its healthcare business, a crucial component of its strategic transformation. The U.S. retail pharmacy segment showed increased sales, with comparable sales rising 5.7%. However, retail sales declined due to weakened demand for COVID tests, softer consumer spending, and other factors. The international segment, including the U.K. subsidiary Boots, reported sales growth of over 12%, while the U.S. healthcare segment saw a significant increase in revenue.
The company administered approximately 400,000 COVID vaccines in the quarter, down from 2.9 million in the same period last year. Walgreens remains focused on addressing challenges in the evolving healthcare landscape, aiming for more profitable growth in the near term.
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