Walgreens’ Results Hit By COVID, ‘Exceptionally Weak’ Cold And Flu Season

Retail pharmacy chain Walgreens said on Wednesday (March 31) that its latest earnings results were dragged lower by an “exceptionally weak cough, cold and flu season” that crimped its same-store sales by 3.5 percent and trimmed earnings by 10 percent.

For the three months ending Feb. 28, the Illinois-based owner of 9,000 drugstores reported $32.8 billion in total revenue with adjusted earnings per share of $1.26. While both results were above company expectations they were less than average analysts’ expectations.

However, the retailer’s newly installed CEO Rosalind Brewer, who took over the top job on March 15, said she was raising full-year earnings guidance to mid-to-high single-digit growth versus a previous forecast for low single-digit growth. “The revised guidance reflects first-half performance above expectations and anticipated strong growth in the second half of the fiscal year,” the company’s statement said. “The situation continues to be fluid in the second half due to COVID-19.”

After the Cold & Flu Stumble

Walgreens’ cold and flu revelation comes just one week after smaller rival Rite Aid pre-announced a similar trend that it said caused a nearly 40 percent decline in its high-margin cough, cold and flu remedies business this winter, and that its quarterly results due out April 15 had been “significantly impacted.” The news sent its shares tumbling by about 20 percent.

On Tuesday (March 30), as part of its strategy to generate alternative profit sources, Walgreens announced that it would offer customers a connected bank account feature designed to boost loyalty, rewards and convenience for both in-store and online purchases via a new three-way tie-up with InComm Payments and MetaBank. In January, it made a similar announcement concerning a prepaid debit and credit card pact with Mastercard and Synchrony Financial, also designed to broaden its focus on health and well-being.

“I am optimistic about our ability to drive sustainable, long-term value for our shareholders, while acknowledging that there is still work to be done to stabilize the base business,” Brewer said. “I will continue to review closely all our initiatives, strategies and opportunities to capitalize fully on the incredible potential in front of us. Our team will move swiftly and decisively to best serve the needs of our patients, customers and communities around the world, at this critical time and beyond.”

Digital Initiatives

Walgreens said that its “Find Care” platform saw nearly 70 million visits in the second quarter as customers sought COVID-19 testing and vaccinations. At the same time, its “MyWalgreens” loyalty membership has grown by more than 40 percent to 56 million members since the start of the calendar year.

In addition, the company said that its ongoing retail transformation and alternative profit efforts would continue, as would its convenience initiatives, such as the nationwide rollout of its same-day delivery partnership with Instacart, which has filled four million orders since its launch one month ago.

The company also noted the strength of its international operations, including Boots UK, which saw its online sales rise 105 percent in the second quarter. “The international segment continues to be heavily impacted by COVID-19, with higher incidence rates and additional lockdowns across a number of geographies,” CFO James Kehoe told analysts and investors on the company’s earnings call. “Despite this, we are very encouraged that the business outperformed expectations [with] focused execution, notably in Boots UK and Ireland, which posted strong growth across all of our eCommerce businesses.”