Walgreens Q1 gets boost from Rite Aid stores; plans $1 billion in cost cuts
Walgreens Boots Alliance came out of the gate strong in its first quarter, and also announced the launch of a cost management program to save more than $1 billion annually within three years.
The company’s net income rose to $1.12 billion, or $1.18 a share, in the quarter ended Nov. 30, from $821 million, or 81 cents a share, in the same period a year ago. Excluding non-recurring items, adjusted earnings per share came to $1.46, above analysts’ estimates of $1.43.
Sales rose 9.9% to $33.79 billion, better than analysts expected, helped partially by a sales boost from the stores that Walgreens acquired from Rite Aid. Retail Pharmacy USA sales rose 14.4% to $25.7 billion, topping estimates. Excluding the benefit from acquired Rite Aid stores, organic sales growth was 4.6% in the quarter. Pharmacy sales, which accounted for 74.4% of the division’s sales in the quarter, rose 17.5% over the year-ago quarter, primarily due to higher prescription volumes from the acquisition of Rite Aid stores and from central specialty.
Walgreens said it has launched a “transformational cost management program” targeting annual cost savings in excess of $1 billion by the end of the third year. The program includes “divisional optimization initiatives, global smart spending, global smart organization and digitalization of the enterprise to transform long-term capabilities.” Walgreens said it anticipates "significant restructuring and other special charges" as the cost-cutting measures are implemented.
“Divisional optimization has already started and includes cost reduction activities in the pharmaceutical wholesale division and in the company's retail businesses in Chile and Mexico,” Walgreens stated. “Additionally, the company has initiated global smart spending and smart organization programs, initially focused on the company's retail pharmacy USA division, its retail business in the UK and its global functions.
The program launches amid an increasingly competitive drug store and health care market, reflected in CVS Health’s acquisition of health insurance giant Aetna. The industry is also gearing up for disruption and competition from Amazon via its acquisition of online pharmacy PillPack in June. Walgreens has announced a number of initiatives in recent months, including a partnership with Kroger.
“We are pleased to have delivered double digit percentage growth in earnings per share in the first quarter, including solid results in the U.S.,” said executive vice chairman and CEO Stefano Pessina. “We continue to focus on and invest in transforming our business. We have made good progress on partnerships, including advancing our collaborations with Kroger, FedEx and Humana and, earlier this week, we announced an initiative with Verily to further expand our health care offering.”
The company’s net income rose to $1.12 billion, or $1.18 a share, in the quarter ended Nov. 30, from $821 million, or 81 cents a share, in the same period a year ago. Excluding non-recurring items, adjusted earnings per share came to $1.46, above analysts’ estimates of $1.43.
Sales rose 9.9% to $33.79 billion, better than analysts expected, helped partially by a sales boost from the stores that Walgreens acquired from Rite Aid. Retail Pharmacy USA sales rose 14.4% to $25.7 billion, topping estimates. Excluding the benefit from acquired Rite Aid stores, organic sales growth was 4.6% in the quarter. Pharmacy sales, which accounted for 74.4% of the division’s sales in the quarter, rose 17.5% over the year-ago quarter, primarily due to higher prescription volumes from the acquisition of Rite Aid stores and from central specialty.
Walgreens said it has launched a “transformational cost management program” targeting annual cost savings in excess of $1 billion by the end of the third year. The program includes “divisional optimization initiatives, global smart spending, global smart organization and digitalization of the enterprise to transform long-term capabilities.” Walgreens said it anticipates "significant restructuring and other special charges" as the cost-cutting measures are implemented.
“Divisional optimization has already started and includes cost reduction activities in the pharmaceutical wholesale division and in the company's retail businesses in Chile and Mexico,” Walgreens stated. “Additionally, the company has initiated global smart spending and smart organization programs, initially focused on the company's retail pharmacy USA division, its retail business in the UK and its global functions.
The program launches amid an increasingly competitive drug store and health care market, reflected in CVS Health’s acquisition of health insurance giant Aetna. The industry is also gearing up for disruption and competition from Amazon via its acquisition of online pharmacy PillPack in June. Walgreens has announced a number of initiatives in recent months, including a partnership with Kroger.
“We are pleased to have delivered double digit percentage growth in earnings per share in the first quarter, including solid results in the U.S.,” said executive vice chairman and CEO Stefano Pessina. “We continue to focus on and invest in transforming our business. We have made good progress on partnerships, including advancing our collaborations with Kroger, FedEx and Humana and, earlier this week, we announced an initiative with Verily to further expand our health care offering.”