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May 31, 2023
Walgreens Q3 2023 Earnings Report
Walgreens reported adjusted EPS growth despite facing challenges from lower COVID-19 demand and consumer spending uncertainty. The company revised its full-year guidance and initiated actions to improve profitability, including raising the cost savings program target.
Key Takeaways
Walgreens Boots Alliance (WBA) reported an 8.6% increase in sales to $35.4 billion for the third quarter of fiscal year 2023. Adjusted EPS increased by 3.3% to $1.00. However, the company revised its full-year adjusted EPS guidance to $4.00 - $4.05 due to consumer market trends and lower COVID-19 demand. WBA is taking immediate actions to improve profitability, including raising its Transformational Cost Management Program target to $4.1 billion.
Third quarter sales increased 8.6 percent year-over-year to $35.4 billion, and up 8.9 percent on a constant currency basis.
Adjusted EPS increased 3.3 percent to $1.00, up 3.6 percent on a constant currency basis reflecting a 19.5 percent headwind from significantly lower COVID-19 vaccine and testing volumes.
Revised full-year adjusted EPS guidance to $4.00 to $4.05 from $4.45 to $4.65, to reflect consumer and category conditions, lower COVID-19 contribution, and a more cautious macroeconomic forward view.
Raising Transformational Cost Management Program target from $3.5 billion to $4.1 billion in total savings.
Walgreens
Walgreens
Walgreens Revenue by Segment
Walgreens Revenue by Geographic Location
Revenue by Segment
U.S. Healthcare Revenue
CapyFin.comRevenue by Geographic Location
International Revenue
CapyFin.com Forward Guidance
Walgreens Boots Alliance expects adjusted EPS of $4.00 to $4.05 for the full fiscal year 2023, reflecting challenging consumer and macroeconomic conditions, and lower COVID-19 vaccine and testing volumes. Preliminary expectations for fiscal year 2024 include low- to mid-single digit adjusted operating income growth.
Positive Outlook
- Adjusted operating income growth is expected to accelerate in the fourth quarter from 0.6 percent in the third quarter.
- U.S. Healthcare and U.S. Retail Pharmacy performance more than offsetting headwinds from lower sale and leaseback program benefits.
- U.S. Healthcare and U.S. Retail Pharmacy performance more than offsetting headwinds from lower COVID-19 contribution.
- U.S. Healthcare and U.S. Retail Pharmacy performance more than offsetting headwinds from the sale of holdings in AmerisourceBergen.
- Raising the Transformational Cost Management Program target from $3.5 billion to $4.1 billion in cumulative savings by fiscal 2024; expecting cost savings of $800 million in fiscal 2024
Challenges Ahead
- Challenging consumer and macroeconomic conditions.
- Lower COVID-19 vaccine and testing volumes.
- The fourth quarter is expected to be negatively impacted by a higher effective tax rate.
- Shifting U.S. consumer spending with heightened macro pressures.
- Impact of a weaker respiratory season for both U.S. Retail Pharmacy and U.S. Healthcare.