A tale of two pharmaciesWalgreens tries to treat its bruised share price with a healthy earnings report, but investors are still feeling shaky after the brand dropped its Boots sale plans.
- Walgreens shares sank 7.3% on Thursday to hit their lowest levels since December 2020 despite beating on both ends in Q3. The pharmacy chain posted EPS of $0.96 on revenues that fell 4% to come in at $32.6bn.
- But everyone was talking about its Boots deal, or lack thereof. Walgreens just recently abandoned its plans to sell off its UK-based brand after finding that chaos in the economy meant that bids for the sale were below expectations. Boots sees flat sales and low store visits, so Walgreens wanna shed the dead weight.
- All of that and more contributed to disappointing guidance. The company reiterated its forecast for single digit earnings-per-share growth in the rest of the year, made worse by waning covid-related sales, heavy investments in its health-care biz, and net income that’s feeling the sting of a $683m opioid settlement with Florida.
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Walgreens needs some pain reliefMost people are chuffed that covid is over, but Walgreens (or its balance sheet anyway) misses the rush on healthcare products that accompanied the pandemic.
🔍 Key points:
- The pharmacy group saw shares sink nearly 6% on Thursday to erase all of its March gains and see its worst day since July last year, despite beating on both ends with EPS of $1.59 on revenues of $33.76bn in Q2.
- It’s the current quarter that’s the problem though. Walgreens said that Omicron had contributed to its earnings beat by bringing in higher foot traffic, as well as sales of covid tests and sanitizing equipment. Now though, as covid fades, it seems to be losing momentum.
- The brand failed to raise its FY forecast, leading to a slew of downgrades. A Raymond James analyst said “this new management – and I commend them for that – but the problem is I can name five things wrong with the core business and not much right”. Ouch.
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These Boots are made for walkingWalgreens takes a walk on the PE-buyout side of life and looks at selling off its Boots pharmacies.
- Walgreens has received a takeover offer for its 2,000 U.K.-based Boots pharmacies, which are expected to be valued at around $7bn, after asking Goldman Sachs in December to “explore options” for the chain.
- CEO Roz Brewer is spending billions to take the drugstore in a new direction. Brewer took over only a year ago and hopes to “remake” America’s healthcare experience. Sounds easy enough…
- Will last year’s private equity buyout craze continue? PE-buyouts made up 27% of all M&A activity in 2021, the highest percentage on record and up from 20% in 2020.
Illustration by TradingView