The Economy

Walgreens Boots Alliance Narrows 2016 Forecast

Sales rose 14% for the second quarter but still fell short of analysts' projections.
Katie Kuehner-HebertApril 5, 2016
Walgreens Boots Alliance Narrows 2016 Forecast

Double-digit growth in sales helped Walgreens Boots Alliance post better-than-expected earnings for its fiscal second quarter.

Net sales for the quarter that ended Feb. 29 rose 13.6% to $30.2 billion, compared with the same quarter a year ago. The increase was largely due to the Deerfield, Ill.-based company’s full consolidation of European health and beauty retailer Alliance Boots for the entire quarter.

While GAAP net income fell 54%, to $930 million ($0.85 per diluted share), that was largely because of an accounting change the company booked in 2015 after Walgreens completed the acquisition of Alliance Boots at the end of 2014, the company said. Earnings adjusted for the accounting change and one-time costs was $1.31 per diluted share, $0.04 per share above analysts’ average expectations, according to Zacks Investment Research.

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Sales fell short of analysts’ average estimate of $30.66 billion, however. Foreign currency exchange rates shaved $750 million, or 2.4%, off of the sales number.

“We continued to make good progress in the quarter in reducing costs and establishing more efficient working practices, which contributed to overall adjusted earnings growth,” said the company’s executive vice chairman and chief executive Stefano Pessina in a press release. “We remain on track to achieve our expectations for this fiscal year, as we work to mitigate lower pharmacy reimbursement rates and challenging retail sales environments.”

Walgreens Boots Alliance raised by 5 cents per share its low end of guidance for fiscal year 2016. The company anticipates adjusted net earnings per diluted share of $4.35 to $4.55 for the year. The guidance continues to assume no material accretion from the pending $9 billion deal for rival drugstore chain Rite Aid and no significant changes in currency exchange rates.