Walgreens, the retail pharmacy giant, has reported fiscal fourth-quarter earnings that fell short of expectations amid declining demand for Covid vaccines and tests in the US. This marks the second consecutive quarter in which the company has underperformed Wall Street’s adjusted earnings expectations. Walgreens expects adjusted earnings per share of $3.20 to $3.50 in the coming fiscal year, lower than analysts’ estimate of $3.72. The company attributes lower Covid-related sales, a higher tax rate, and lower sale and leaseback contributions as factors that will offset earnings growth. Walgreens also anticipates revenue for the year to be in the range of $141 billion to $145 billion, which is less than the estimated sales of over $144 billion by Wall Street analysts.
The disappointing earnings come as Walgreens navigates challenges including a leadership shakeup, its foray into healthcare, and recent labor pressure from pharmacy staff. The company’s efforts to transition from a major drugstore chain to a large healthcare company have been met with profitability concerns due to declining consumer spending and decreasing demand for Covid products. Moreover, Walgreens is facing an open revolt among pharmacists and pharmacy technicians, who staged a three-day walkout to protest chronic understaffing and poor working conditions. As a result of these factors, shares of Walgreens have dropped by over 39% this year, with the company’s market value now at $19.51 billion.
Within its business segments, Walgreens’ US retail pharmacy segment generated $27.66 billion in sales for the fiscal fourth quarter, representing a 3.7% increase from the same period last year. However, retail sales for the quarter decreased by 4.3% compared to the previous year, and comparable retail sales fell by 3.3%. Walgreens’ international segment saw sales of $5.78 billion, a more than 12% increase from the same period a year ago. The company’s US healthcare segment’s sales also grew, reaching $1.97 billion, up from $622 million in the same period last year. Despite the challenges it faces, Walgreens has made some strides in its healthcare transformation, with primary-care provider VillageMD and home care coordinator CareCentrix both reporting revenue growth.
