Drugstore chain Walgreens Boots Alliance Inc. WBA reported strong third-quarter results before the opening bell on Thursday, sending shares higher in premarket trading.
The Deerfield, Illinois-based company posted adjusted earnings of $1.47 per share, topping Refinitiv’s estimates of $1.43. Revenue grew a meager 0.7% from the prior-year quarter to $34.59 billion, but edged past expectations of $34.46 billion.
Sales in the company’s U.S. retail pharmacy segment grew 2.3% from the year-ago quarter to $26.5 billion, boosted by a 4.3% increase in prescription drug sales. Retail sales, however, decreased 2.9%. In addition, while comparable pharmacy sales rose 6% due to higher prescription drug prices, comparable retail sales declined 1.1% on the back of a continued de-emphasis on tobacco products.
Walgreens’ international business recorded a 7.3% decline in sales to $2.8 billion as a result of an adverse currency impact and poor performance from its U.K. operations. During the earnings call, Chief Financial Officer James Kehoe told analysts that due to the ongoing challenges in the U.K., the company is closing 200 Boots drugstores and will also be reviewing its U.S. locations.
“More to follow in the coming months as we work through these key opportunities,” he said.
The pharmaceutical wholesale division recorded $5.9 billion in sales, which was down 1.7% from last year as a result of adverse currency impacts. On a constant currency basis, however, the business recorded an 8.3% increase in sales as growth in emerging markets continued to expand.
In a statement, Executive Vice Chairman and CEO Stefano Pessina said he is pleased with the company’s performance following a “difficult” second quarter as it made progress in its strategic goals, which are being implemented to fight off competition from Amazon AMZN and other online retailers as consumer preferences change. The industry as a whole is also under pressure from insurers, who are paying pharmacies less to fill prescriptions.
“We will continue our aggressive response to rapidly shifting trends, and have already seen improved U.S. retail sales and prescription growth and are making good progress in implementing our Transformational Cost Management Program,” he said. “Together, this gives us the confidence to reiterate the fiscal 2019 guidance we previously provided.”
For the full year, Walgreens is guiding for earnings per share to be roughly flat on a constant currency basis. On a reported currency basis, it anticipates an adverse currency impact of approximately 6 cents.
With a market cap of $47.89 billion, shares of Walgreens were up 4.66% on Thursday morning at $54.82. GuruFocus estimates the stock has tumbled 20% year to date.
According to GuruFocus’ Industry Overview page, Walgreens is the third-largest company in the retail-defensive sector, behind Walmart Inc. WMT and Costco Wholesale Corp. COST.
Disclosure: No positons.
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