Walgreens share price down 12% after Q2 earnings revenue miss
The drugstore chain's stock is down after missing Wall Street estimates.
|Earnings per share (EPS)||$1.64|
|Net Income||$1.16 billion|
|Same store sales||-3..8%|
Walgreens share price falls 12% as Q2 earnings revenue misses estimates
Walgreens' earnings per share (EPS) was $1.64, below financial analysts’ expectations of $1.72. Walgreens’ revenue was $34.53 billion, slightly under estimates of $34.56 billion. The drugstore chain’s net income declined to $1.16 billion from $1.35 billion. Walgreens Q2 results also disappointed as same-store sales also dropped 3.8%. The only positive statistic was in sales, which rose 7.3% to $26.3 billion after purchasing another drugstore chain, Rite Aid.
Walgreens share price ironically declined because of good health news. A better-than-expected US flu season led to fewer shoppers going to the drugstore chain for cold medicine. Walgreens’ Q2 profits also plummeted because of cheaper generic medication prices.
Chief executive officer, (CEO), Stefano Pessina, noted the challenges affecting Walgreens’ Q2 profits. One issue is lower reimbursement rates for medicine from government health care plans.
‘The market challenges and macro trends we have been discussing for some time accelerated, resulting in the most difficult quarter we have had since the formation of Walgreens Boots Alliance,’ said Pessina.
‘During the quarter, we saw significant reimbursement pressure, compounded by lower generic deflation, as well as continued consumer market challenges in the US and UK,’ added Pessina.
How do Walgreens’ Q2 results compare to other drugstore chains?
Walgreens Q2 results are worse than rival drugstore chain CVS. CVS had positive Q4 results because of higher prescriptions filled at their pharmacies.
What’s next for Walgreens’ Q3 profits?
Pessina said that his expectations for fiscal year 2019 were lowered because of the challenges of generic medicine prices falling. Because of that factor, he expected Walgreens’ earnings to remain flat.
‘While we had begun initiatives to address these trends[of generic medicine prices dropping], our response was not rapid enough given market conditions, resulting in a disappointing quarter that did not meet our expectations,’ said Pessina.
‘As a result, we are now expecting roughly flat adjusted EPS growth for fiscal 2019,’ added Pessina.
Walgreens hopes to revive brand through digitisation
Pessina vowed to improve Walgreens’ profits in the future by speeding up digitisation of their pharmacies to attract more customers. The chain will also sell CBD hemp-based oil products similar to CVS to keep up with customer demand.
‘We are going to be more aggressive in our response to these rapidly shifting trends. We are focusing on our operational strengths and addressing weaknesses, making a number of senior appointments to bring change and accelerating the digitalization and transformation of our business’, said Pessina.
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