Walgreens Cuts 2019 Profit Forecast As It Is Hit By Lower Drug Prices

By Donna Ahern
Walgreens Cuts 2019 Profit Forecast As It Is Hit By Lower Drug Prices

Walgreens Boots Alliance Inc has cut its 2019 profit growth forecast as the drugstore chain struggles with falling generic drug prices in a crowded market.

The company also reported a quarterly profit that missed Wall Street estimates and said macro trends had resulted in the "most difficult quarter" for the company since the merger of Alliance Boots and Walgreen.

The company reduced its adjusted earnings growth forecast for fiscal 2019 from a range of 7% to 12% growth to roughly flat, at constant currency rates.

The magnitude of the cut surprised some Wall Street analysts, who had expected it after the company had warned about increased competition and reimbursement pressures at its pharmacies.

Missed Metrics

"This was truly a terrible print, as most metrics missed materially," Evercore ISI analyst Ross Muken said in a note.


Muken said the deterioration in U.S. pharmacy is particularly concerning and does not expect the management to be able to instill confidence in investors during the conference call.

"We are going to be more aggressive in our response to these rapidly shifting trends," Walgreens Chief Executive Officer Stefano Pessina said.

The company said it would be pushing forward on the execution of its partnership initiatives.

Analysts have repeatedly questioned Walgreens' strategy of signing partnerships unlike many of its rivals that have chosen to ink multi-billion dollar merger deals to stem the impact from rising pricing pressures.

Walgreens now expects to save more than $1.5 billion from its previously announced cost-savings program that includes consolidation of warehouses and shutting stores.


Second Quarter

Net income attributable to Walgreens fell 14% to $1.16 billion in the second quarter ended February 28.

Excluding items, the company earned $1.64 per share, missing analysts' expectations of $1.72 per share, according to IBES data from Refinitiv.

Revenue rose 4.6% to $34.53 billion, but was shy of the average estimate of $34.56 billion.

News by Reuters, edited by Donna Ahern Checkout. Click subscribe to sign up for the Checkout print edition.

Stay Connected With Our Weekly Newsletter

Processing your request...

Thanks! please check your email to confirm your subscription.