Walgreens Boots Alliance exceeded Wall Street’s expectations for fourth quarter earnings on Thursday as the company saw demand for Covid-19 vaccines spike amid a growing number of employer mandates.
The results were released ahead of a virtual investor day where Roz Brewer, CEO of Walgreens, who joined the company earlier this year, outlined her strategy for refreshing the company’s brand and driving growth.
Shares closed 7.4% to $ 50.77 on Thursday as investors processed the drugstore chain’s ambitious plans to transform into a healthcare-focused company. A key part of that strategy was the announcement of a $ 5.2 billion investment in VillageMD, a primary care company opening clinics in Walgreens stores.
The majority stake in VillageMD will not only help Walgreens fill out prescriptions but also have doctors to write them out.
During the fourth quarter, Walgreens administered 13.5 million vaccines – almost double the roughly 7 million it expected in the three month period. It’s ready for another wave of vaccinations as people get booster doses and younger children are expected to qualify for the vaccinations soon.
“Mandates matter,” said CEO Roz Brewer in an interview with CNBC’s Bertha Coombs. “There are a lot of companies and organizations, cities and towns that have mandates and I think it forces people to say, ‘I have to go to work. So I have to get this vaccine.’ So it creates an increase. And we see that in our shops. “
In addition, people are worried about getting Covid – especially with the Delta variant. Along with the vaccination repeal, Walgreens said it had gotten a boost in sales from at-home Covid testing and a recovery in demand for over-the-counter medicines for colds, coughs and flu.
Walgreens also said it achieved its goal of cutting the annual cost of its business a year ahead of schedule. CFO James Kehoe said the cost savings target would be increased to $ 3.3 billion by fiscal 2024.
He said the company expects flat adjusted earnings per share growth in fiscal 2022 at constant exchange rates.
Here’s what Walgreens reported versus analyst expectations for the fourth quarter ended August 31: based on refinitive data:
- Earnings per share: adjusted $ 1.17 versus expected $ 1.02
- Revenue: Expected $ 34.26 billion versus $ 33.30 billion
For the quarter, net income rose to $ 627 million, or 72 cents per share. from $ 373 million, or 43 cents per share, last year. Walgreens made $ 358 million, or 41 cents per share, from its continuing operations in the most recent quarter.
Without items, however, the company made $ 1.17 per share, beating the $ 1.02 analysts polled by Refinitiv had expected.
Sales rose to $ 34.26 billion from $ 30.37 billion last year, more than analysts’ expectations of $ 33.30 billion.
Sales online and at Walgreens stores in the US that were open for at least a year increased 8.1% year over year as consumers received Covid-19 vaccinations and filled out more prescriptions. Health and wellness product sales rose 14% year over year as consumers bought more Covid tests, vitamins and over-the-counter medicines for coughs, colds and flu at home.
Brewer said Covid vaccines had a “halo effect” when sold locally. When people went to the pharmacy for the syringe or waited 15 minutes, they bought some other goods, from beauty items to allergy medication. She said Walgreens wants to increase the number of other types of vaccines it delivers, for hepatitis B and more.
Brewer also told CNBC that the company will be scrutinizing tobacco it kept on the shelves even though its rival CVS Health is dropping the products.
Its international segment – which includes UK chain Boots – is recovering after the Covid-19 restrictions were lifted in July. Compared to the same quarter last year, sales online and in Boots UK stores that are open for at least a year increased 11.4% in pharmacy services and 15% in retail.
Pedestrian traffic in boat shops on highways, such as near offices and commuter centers, is recovering but is still below pre-pandemic levels, the company said.
The drugstore chain said it has given more than 40 million Covid vaccines to date. Vaccinations peaked in the third quarter with 17 million vaccinations.
At the close of trading on Thursday, the shares of Walgreens Boots Alliance are up about 27% this year. The company’s market value is nearly $ 44 billion.
Read the company’s press release here.