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Walgreens Continues Pushing Into Healthcare Despite Fierce Competition

Last week, Walgreens Boots Alliance (NASDAQ: WBA) reported that revenue rose and exceeded expectations despite a sharp decline in demand for Covid tests and vaccines that caused profit to decline.

Quarterly Figures

For the quarter that ended on February 28th, the health care company earned a net profit of $703 million, or 81 cents a share. This is significantly below from last year’s comparable quarter when Covid’s Omicron variant fueled the drugstore chain to earn $883 million, or $1.02 a share. Excluding certain items, per-share earnings were $1.16 which topped the estimate brought on by Refinitiv’s poll of analysts that amounted to $1.10.

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However, revenue rose 3% YoY and amounted to $34.86 billion, topping the expected $33.53 billion. Health care unit revenues topped $1.6, VillageMD’s primary care services grew 30% and CareCentrix’s home care rose 25%.

Yet, operating income fell from more than $1.2 billion to nearly $200 million. What a difference a year makes due to a $306 million pre-tax charge for opioid litigation claims, increase in investments in pharmacy wages and as well as costs that resulted from the acquisition of a primary care provider.

Growing The Healthcare Unit

With Rosalind Brewer at the helm for two years now, the emphasis is on expanding the health unit primary care and in-home services. The Summit Health acquisition alone costed $3.5 billion during the quarter but as a result, Walgreens is now one of the largest players among primary care providers.

Intense Competition In Healthcare

Despite its intense push into healthcare, Walgreens has no time to waste as earlier this year, Amazon (NASDAQ: AMZN) started expanding its presence in the healthcare sector. Amazon’s new subscription plan for generic drugs is a service named RxPass and it is certainly a threat to Walgreens' chain of pharmacies.

CVS Health Corporation (NYSE: CVS) is also making moves to encourage customers to treat common health issues at their pharmacies as opposed to visiting a healthcare provider. It created the so-called HealthHubs which even offer care for chronic conditions. Even Walmart (NYSE: WMT) began offering healthcare services at its stores. Walgreens’ push into healthcare with its VillageMD acquisition should result in a launch of 1,000 clinics at its stores by 2027, but Amazon and low-cost retailers, such as Walmart and Dollar General Corporation (NYSE: DG) that have such a large presence, threaten their growth opportunities and their already-low margins. Amazon has certainly not been shy about its intentions to disrupt its healthcare and it already changed e-commerce for good.

A Covid-owed Drop

Comparable sales in the front of store dropped by 1% due to weakened demand for over-the-counter Covid tests.U.S. retail pharmacy segment generated $27.6 billion in revenues which translates to a drop of 0.3%. However, comparable pharmacy prescription sales rose 4.9% due to higher prices on brand name drugs.

The international segment is a rare bright spot

Despite currency headwinds, international sales rose more 1.5% YoY to $5.7 billion. Boots UK comparable retail sales jumped 16%, making an eighth consecutive quarter of market share gains.

Outlook

The full year earnings guidance was reaffirmed to be in the range between $4.45 to $4.65 per share, with adjusted earnings growth project at mid-20% over the next two quarters.

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This article Walgreens Continues Pushing Into Healthcare Despite Fierce Competition originally appeared on Benzinga.com

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