Pedestrians walk past a Walgreens store in New York.
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Walgreens Boots Alliance missed Wall Street earnings expectations Wednesday, sending shares down by more than 5% in early trading.
Here’s what Walgreens reported for its fiscal first quarter ended Nov. 30 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $1.37 adjusted, vs. $1.41 expected
- Revenue: $34.34 billion, vs. $34.6 billion expected
Walgreens is maintaining its outlook for the year of “roughly flat” adjusted earnings per share growth despite a soft first quarter, CEO Stefano Pessina said in the earnings release.
“We are confident our strategic plans are the right ones to drive long-term sustainable growth going forward,” Pessina said.
Weak prescription volume was the biggest surprise in the quarter, the company said on its earnings call, coming in below what the company was expecting.
On an unadjusted basis, Walgreens’ fiscal first-quarter net income fell 24.8% to $845 million, or 95 cents per share, from $1.12 billion, or $1.18 per share, a year earlier.
Excluding currency exchange rates and other items, Walgreens earned $1.37 per share, below the $1.41 analysts surveyed by Refinitiv expected.
Shares fell 5.8% to $55.89.
Same store sales increased by 1.6% from the same period a year earlier.
The pharmacy chain remains under pressure as more consumers shop online for drugstore staples such as shampoo and vitamins.
“As you will see from our figures, it has been a slow start to the financial year with the competitive US pharmacy environment and soft trading conditions in the UK,” Pessina said on the earnings call.
Insurers are also squeezing pharmacies, paying them less to fill prescriptions.
In response, Walgreens is slashing costs. The company aims to trim more than $1.8 billion by fiscal year 2022.
Pessina said that the company is “satisfied with the progress” made by its cost-cutting program. Global Chief Financial Officer James Kehoe said that these cost savings initiatives are “gaining momentum” and that the company has “a much higher level of confidence” that it can exceed the $1.8 billion target that was set in October.
“These savings will allow us to fund the investments needed to create new and innovative business models,” Kehoe said.
Walgreens is also exiting the sale of e-cigarettes which dragged slightly on its retail sales this quarter. However, this move will have a bigger impact on earnings in future quarters, Kehoe said. Walgreens is expecting a 6 cents full year earnings per share hit because of the exit, according to Kehoe.
The company announced it would stop selling e-cigarettes in October. It also raised the tobacco buying age to 21 last spring after the FDA called the drugstore chain out for allegedly selling to minors.
Walgreens has a market cap of $52.6 billion as of Tuesday’s close.
-CNBC’s Angelica LaVito contributed to this report.