Pharmacy Sales Prescribe Growth for Walgreens

The drugstore chain's pharmacy same-store sales rose 5.1% in Q2, offsetting a 2.7% drop in retail comparable sales.
Matthew HellerMarch 28, 2018

Walgreens Boots Alliance reported better-than-expected quarterly results on Wednesday as growth in its pharmacy business offset falling retail sales.

As Reuters reports, the drugstore giant has been seeking to stanch the retail bleeding by focusing on boosting pharmacy sales through partnerships with pharmacy benefit managers such as Prime Therapeutics.

In the second quarter, that strategy gained some traction as pharmacy same-store sales rose 5.1%, driven by a 9.1% increase in prescriptions filled. Same-store retail sales fell 2.7% percent, missing analysts estimates of a flat growth.

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Retail sales have been slipping for drugstore chains as consumers shift to online purchases.

Overall, Walgreens posted a 12% gain in net sales to $33.02 billion, fueled in part by its ongoing takeover of nearly 2,000 Rite Aid stores, while excluding items, the company earned $1.73 per share. Analysts on average were expecting a profit of $1.55 per share on revenue of $32.19 billion.

“We delivered the highest sales growth in eight quarters, as well as strong cash generation and record U.S. pharmacy market share,” CEO Stefano Pessina said in a news release.

Total pharmacy sales increased 18.7% compared with the year-ago quarter as prescriptions filled in comparable stores increased 4.0%, primarily due to volume growth from strategic pharmacy partnerships. The PBM alliances have given Walgreens more than 20 million additional customers.

Walgreens’ share of the U.S. retail prescription market increased approximately 100 basis points over the year-ago quarter to 21.4%.

Rival CVS Health has moved to boost its healthcare business by acquiring Aetna, the third largest health insurer in the U.S. Other insurers have been snapping up pharmacy benefit managers.

Pessina said in an earnings call that Walgreens has to change to adapt to future customer needs, but that doesn’t mean it has to follow CVS’ lead. “I don’t believe that change is only possible if you merge with a health plan,” he told analysts. “There are many other models.”

For the full year, Walgreens raised its adjusted earnings forecast to between $5.85 and $6.05 per share from between $5.45 and $5.70 per share.