Walgreens Beats 2Q Estimates With Cost Cutting (WBA.O)
Walgreens Boots Alliance Inc. reported a better-than-expected quarterly profit for the second quarter of fiscal year 2016. Net income fell to $930 million, or 85 cents per share, in the quarter, from $2.04 billion, or $1.93 per share, a year earlier. However, the year-ago quarter included a non-cash gain of $814 million. Adjusted earnings per share came in at $1.31, up 11 percent from the year-ago adjusted number. This beat the average analyst estimate of $1.28 by 3.1 percent.
The company’s results were helped by cost cutting and taking full control of Alliance Boots, the European pharmacy chain the company purchased in December 2014. In April of last year, the company reported that it had identified ways to cut costs by $1.5 billion by the end of its fiscal year in August 2017. The company also now controls the 55 percent of Alliance that it did not control previously.
In the second quarter, net sales at the pharmacy chain rose 13.6 percent year over year, increasing to $30.18 billion. This missed analysts’ average estimate of $30.66 billion. The Retail Pharmacy USA division increased sales 2.1 percent on a year-over-year basis with sales of $21.5 billion in the quarter. Pharmacy sales, which accounted for 65% of the division’s sales in the quarter, increased 3.2 percent from the year-ago quarter.
The Retail Pharmacy International division delivered sales of $3.7 billion, with a comparable store sales increase of 2.3 percent year over year. The Pharmaceutical Wholesale division recorded quarterly sales of $5.6 billion on a constant exchange rate, up 1.6 percent year over year. However, unfavorable foreign currency fluctuation affected the quarter’s sales growth by approximately 2.4 percent.
Walgreens is currently in the process of buying smaller rival Rite Aid Corp. In October of 2015, Walgreens agreed to acquire the U.S.-based retail pharmacy chain for $17.2 billion, including acquired net debt. Rite Aid’s shareholders approved the transaction on February 4, 2016. The company said it expected the Rite Aid deal to close in the second half of 2016 as scheduled.