Pharma Chain Walgreens Beats Q2 Estimates, Comp Sales Miss

Pharma Chain Walgreens Beats Q2 Estimates, Comp Sales Miss
April 3, 2020

 

International pharmacy chain Walgreens Boots Alliance, Inc. (Nasdaq: WBA) reported fiscal 2020 second-quarter earnings that declined from the comparable period last year. However, the earnings and revenues beat analysts’ estimates. The company refrained from providing an outlook as it is unable to assess the impact of COVID19. The stock closed at $40.32, down $2.71 or 6.30% from the prior close.

The Deerfield, Illinois company reported 2Q 2020 revenue of $35.82 billion, an increase of 3.7% from $34.53 billion in the similar period last year.

For the quarter ended February 29, 2020, the company posted earnings of $0.946 billion, or $1.07 per share. This compares with $1.156 billion, or $1.24 per share, in the year-ago period. Excluding charges, Walgreens Boots Alliance posted adjusted earnings of $1.343 billion or $1.52 per share in Q2 2020, down from $1.522 billion, or $1.64 a share, in Q2 2019.

Analysts surveyed by Refinitiv anticipated the company to post earnings of $1.46 per share on revenues of $35.27 billion.

The company operates Boots stores in Europe and Asia, Walgreens and Duane Reade stores in the U.S., and international wholesale and distribution networks under the Alliance Healthcare emblem.

Segment-wise,

  • Retail Pharmacy (USA) recorded Q2 2020 revenues of $27.245 billion, compared with $26.257 billion last year.
  • Retail Pharmacy International posted revenues of $3.056 billion, down from $3.082 billion in the year-ago period.
  • Pharmaceutical Wholesale revenue rose to $6.066 billion, from $5.738 billion in the second quarter of 2019.

Walgreens, which owns international beauty brands including No7, Liz Earle, Sleek MakeUP, Soap & Glory, and Botanics, stated that it recorded a sharp rise in sales and then a decline in March as the coronavirus continues to spread across the globe and keep people at home.

The global pharmacy’s Comp sales rose 26% in the initial 21 days of the month as people resorted to stockpiling of drugs and other goods, Global Chief Financial Officer James Kehoe said. However, in the final week of March, Comp sales declined by mid-teens.

James Kehoe stated that the sharp decrease in the final week could mitigate the earlier gains made by the company as foot traffic continues to decline and sales of non-compulsory goods such as skin-care products continue to decrease.

From the segment-wise revenues, it can be understood that pharmacy sales led the increase in overall revenues. Same-store pharmacy sales increased 3.7%. Prescriptions issued in comparable stores grew 4.9% on a y-o-y basis. Barring the effect of leap day, the U.S. same-store sales grew 2.7% on a y-o-y basis.

For non-pharmacy items, same-store sales increased 0.6% in the quarter, compared with last year. An increase in cold, cough, and flu-related drugs aided the small increase in sales of health and wellness items. Barring tobacco and e-cigarettes, Comp sales of non-pharmacy items rose 1.9%.

Same-store sales were anticipated to increase 3.1% in the U.S. Likewise, pharmacy and front-end comps were expected to rise by 4.4% and 0.1%, respectively, as per Consensus Metrix.

The CFO Kehoe emphasized that Walgreens is ready to handle the slowdown, but hopes that the decline in sales is a temporary phenomenon caused by the lockdown.

Kehoe said, “Our fundamentals are sound and we are convinced we will exit this global crisis in a strong position.”

Last week, Walgreens started providing new channels for U.S. customers to purchase essential goods while continuing the socially distancing process. Clients can now purchase over 60 popular goods such as cleaning solutions, cough and cold drugs at its 7,300 plus pharmacies in the U.S. The company also has collaboration with Postmates to carry out contactless deliveries to clients’ homes.

The mixed results and inability to provide an outlook is expected to keep the stock range-bound with bearish bias in the near term.

The historical price chart indicates that the stock has broken the lower end of the trading range (52-62). Additionally, the stochastic oscillator is also in the bearish zone. Therefore, we are anticipating the stock to decline in the short-term.

wba - technical analysis - 3 April 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world


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