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Walgreens Boots Alliance (NASDAQ:WBA) swung lower in early trading on Thursday after lowering its full-year outlook due to a tough overall backdrop for retail.
“We continue to face a difficult operating environment, including persistent pressures on the U.S. consumer and the impact of recent marketplace dynamics which have eroded pharmacy margins,” warned CEO Tim Wentworth.
The drugstore chain operator reported sales increased 2.6% year-over-year to $36.4 billion. Sales were up 2.5% on a constant currency basis, reflecting sales growth across all segments. U.S. Retail Pharmacy segment sales were up 2.3% to $28.5 billion, driven entirely by comparable pharmacy sales, partly offset by a retail decline. Comparable sales for the U.S. Retail Pharmacy segment increased 3.5 percent from the year-ago quarter. International segment sales were up 2.8% to $5.7 billion. U.S. healthcare segment sales rose 7.6% to $2.1 billion.
Operating income was $111 million, compared to an operating loss of $477 million in the year-ago quarter. Adjusted operating income was down 36.3% year-over-year to $613 million, reflecting lower sale-leaseback gains and softer U.S. retail and pharmacy performance, partly offset by cost savings initiatives and improved profitability in the U.S. Healthcare segment. Adjusted EPS was $0.63 vs. $0.71 consensus and $0.27 a year ago.
Net cash provided by operating activities was $605 million in the quarter and free cash flow was $334 million, a $778 million increase compared with the year-ago quarter, each driven primarily by phasing and optimization of working capital. The increase in free cash flow also benefited from decreased capital expenditures.
Looking ahead, Walgreen (WBA) sees full-year EPS of $2.80 to $2.95, down from prior guidance of $3.20-$3.50 and below the consensus estimate of $3.20.
Separately, The Wall Street Journal reported on Thursday that Walgreens (WBA) plans major store closures this year. The report indicated that the company hasn’t settled on a final number of locations to close, as it is still reviewing about a quarter of its stores that aren’t profitable.
Shares of Walgreens Boots Alliance (WBA) fell 5.17% in premarket trading on Thursday.