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WALGREENS LOSES $48M IN FISCAL Q3 AS HEALTHCARE BUSINESS HITS SPEED BUMP

Liza Berger


June 28, 2023
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Executives at Walgreens Boots Alliance expressed disappointment Tuesday in their
fiscal year 2023 third quarter results as the company posted a loss of $48
million on higher sales of $35.4 billion.

“Our performance in the third quarter did not meet our overall expectations, and
we are disappointed to have to change our fiscal 2023 guidance,” Roz Brewer, CEO
of Walgreens, said at the beginning of Tuesday’s earnings call for analysts.
“While we achieved good sales growth and return to adjusted earnings growth in
the quarter, several dynamics created margin pressures that we are factoring
into our full year outlook. We have seen changing market trends that have
consumers prioritizing value in response to a more uncertain and challenging
economic environment.”





Among the challenges the company endured in the quarter, which ended May 31,
were a steeper drop-off in COVID-19 vaccinations and testing with the ending of
the public health emergency, and a weaker respiratory season. Higher inflation
and interest rates also have affected consumer spending, the company said.

Walgreens revised its full-year fiscal year 2023 adjusted earnings per share to
$4 to $4.05 to reflect the headwinds, which are likely to continue into next
year, executives said.






‘SLOWER PROFIT RAMP’

Brewer also mentioned that the company is experiencing “a slower profit ramp for
U.S. healthcare.”

The company’s healthcare business includes primary care unit VillageMD, owner of
Summit Health, a primary, specialty and urgent care provider; pharmacy firm
Shields Health Solutions; CItyMD, an urgent care provider; and CareCentrix, a
home care platform.

While sales at the healthcare business reached $2 billion, more than doubling
from the prior year, it suffered an EBITDA (earnings before interest, tax,
depreciation and amortization) loss of $113 million. The loss partly reflected
new VillageMD clinic expansions and a weaker respiratory season, which affected
Summit, the company said.

To improve profitability at VillageMD, which added 93 clinics in the quarter,
Walgreens hired Rich Rubino to be the chief financial officer of the combined
VillageMD/Summit business. The company also is implementing a three-year plan to
improve performance.

“Achieving our healthcare vision depends on each of our companies delivering on
their respective plans and relentless execution of harvesting growth synergies
across the Walgreens portfolio,” John Driscoll, president of U.S. Healthcare
said. “We’re building a differentiated value-based care delivery model that
successfully integrates pharmacy and medical care for a value-based care market
that will more than double by 2027.”

Walgreens expects the healthcare segment to drive upcoming growth next year.

“Our U.S. healthcare business will be a significant profit driver, including the
first full year of Summit Health, a maturing VillageMD clinic profile, and
strong actions to accelerate their path to profitability,” James Kehoe,
Walgreens’ chief financial officer, said.


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