Walgreens Sales Powered by Covid Vaccine, Test Demand

From the Wall St.Journal, April 1, 2022 Page B3

BY SHARON TERLEP AND WILL FEUER

Walgreens Boots Alliance Inc. posted higher sales for the most recent quarter as demand for Covid-19 tests and vaccines continued to drive growth. Executives said Thursday they are strategizing how the company’s drugstores can continue playing a key role in providing diagnostic and other health services beyond the current pandemic. “Our pharmacists and our technicians are more than capable, as we’ve shown during the pandemic, of delivering these kinds of services,” said Walgreens President John Standley. “That’s a pretty big game changer if we can gain access to that market and in terms of how we grow our business and in terms of the value we can provide in the communities we serve.”

The Deerfield, Ill., drugstore chain said it administered 11.8 million Covid-19 vaccinations in the latest quarter, which ended Feb. 28, and provided 6.6 million Covid-19 tests, including over-the-counter at-home tests. Demand for at-home Covid-19 tests helped drive an increase of more than 43% in U.S. health and wellness sales. Comparable retail sales increased 14.7% in the U.S. from with the year-ago period, the most in more than two decades, the company said. The company had expected a slowdown in Covid-19 tests and vaccines in the coming quarters, though the recent decision by the Food and Drug Administration to clear a second booster shot for adults 50 years and older should lift demand for shots.

Walgreens, like rival CVS Health Corp., has been pushing further into healthcare as it looks to sustain a bump in business through the pandemic. The company last fall paid $5.2 billion for a controlling stake in primary-care network VillageMD and spent $330 million to take a majority stake in home-health benefits manager CareCentrix Inc. Covid-19-related demand led to higher costs in some parts of the business, Walgreens said. Adjusted selling, general and administrative expenses in the U.S. rose 8.3%, driven by investments to support vaccinations and testing as well as raise wages, it said.

Demand for Covid-19 tests, especially at-home kits, significantly outstripped supply at the start of the quarter as the fast-spreading Omicron variant spurred more people to seek diagnostic tools. Demand for at-home Covid-19 tests helped drive a 43.3% increase in U.S. health and wellness sales. Comparable retail sales increased 14.7% in the U.S. compared with the year-ago period, the most in more than two decades, the company said. U.S. prescriptions filled rose by 4.7% in the latest quarter on a comparable basis, largely driven by vaccinations. Excluding vaccinations, the increase was 1.8%.

Overall, Walgreens posted sales of $33.76 billion for the fiscal second quarter, up from $32.78 billion in the same period the year before. Analysts surveyed by FactSet were expecting sales of $33.23 billion. The company posted net income attributable to Walgreens of $883 million, compared with $1.03 billion a year earlier. Earnings from continuing operations were $1.02 a share, compared with $1.06 a share in the year-ago period. Adjusted for one-time items, earnings were $1.59 a share. Analysts surveyed by FactSet were looking for adjusted earnings of $1.37 a share.

Walgreens shares fell nearly 6% to $44.77 Thursday, as some investors saw the company’s move to not upgrade its earnings outlook after the strong quarter as a sign executives expect the business to weaken going forward. Shares of Walgreens are down about 4% this year, compared with a roughly 5% decline in the Dow Jones Industrial Average.