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Walgreens Boots Alliance Fiscal 2021 Third Quarter Results Exceed Expectations

July 1, 2021 BusinessWire

Company Raises Full-Year Guidance to Around 10 Percent EPS Growth 

Third quarter results, year-over-year, including discontinued operations

  • Total earnings per share (EPS), including discontinued operations, were $1.38, compared with a loss of $1.95 in the year-ago quarter; total adjusted EPS increased 83.4 percent to $1.51, up 81.4 percent on a constant currency basis

Third quarter results, year-over-year, from continuing operations


  • Sales increased 12.1 percent to $34.0 billion, up 10.4 percent on a constant currency basis
  • EPS from continuing operations was $1.27, compared with a loss of $2.05 in the year-ago quarter; continuing operations adjusted EPS increased 95.1 percent to $1.38, up 93.6 percent on a constant currency basis

Year-to-date results, year over year, from continuing operations

  • Sales increased 7.2 percent to $98.2 billion, up 6.1 percent on a constant currency basis
  • EPS from continuing operations was $1.89 compared with a loss of $0.18. Adjusted EPS from continuing operations was $3.74, an increase of 10.7 percent on a reported basis and up 9.9 percent on a constant currency basis

Additional highlights

  • Net cash provided by operating activities in the first nine months of fiscal 2021 was $4.3 billion, an increase of $912 million compared with the year-ago period; Free cash flow was $3.3 billion, up $873 million year-over-year
  • Walgreens has administered more than 25 million COVID-19 vaccinations to date

Fiscal 2021 outlook

  • Company raised guidance to around 10 percent growth in constant currency adjusted EPS from continuing operations

DEERFIELD, Ill.--(BUSINESS WIRE)--$WBA #earnings--Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced financial results for the third quarter of fiscal 2021, which ended May 31, 2021.

Chief Executive Officer Rosalind Brewer said, “This quarter’s results demonstrate continued momentum, and while challenges lie ahead, we are in a strong position to grow and innovate our core retail and pharmacy businesses for the future. We are accelerating our investments to advance our operational excellence, including technology innovations that support mass personalization, pharmacy of the future and the next phase of growth in tech-enabled healthcare. These investments are fueled by our Alliance Healthcare divestiture. I remain proud of our team members and the essential role they are playing to help end the pandemic as the communities we serve continue to turn to our trusted brands and expert pharmacists.”

Completion of Strategic Transaction with AmerisourceBergen

WBA completed the divestiture of the Alliance Healthcare businesses to AmerisourceBergen for a total consideration of $6.5 billion, made up of $6.275 billion in cash (subject to a customary net cash and working capital adjustment, which will result in an additional net cash inflow of approximately $0.3 billion) and 2 million shares of AmerisourceBergen common stock. The company has used a portion of the proceeds to eliminate $3.3 billion in debt from its balance sheet and will deploy the remainder to accelerate growth of its core retail pharmacy and healthcare businesses.

Overview of Third Quarter Results

WBA third quarter sales from continuing operations increased 12.1 percent from the year-ago quarter to $34.0 billion, an increase of 10.4 percent on a constant currency basis1, reflecting strong growth in the International segment, aided by the formation of the company's joint venture in Germany during the fiscal year, and solid growth in the United States segment.

Operating income from continuing operations was $1.1 billion in the third quarter, compared with a loss of $1.7 billion in the year-ago quarter, primarily due to $2 billion non-cash impairment charges in the year-ago quarter related to goodwill and intangible assets in Boots UK. Adjusted operating income from continuing operations increased 82.9 percent on a reported currency basis to $1.5 billion, an increase of 82.4 percent on a constant currency basis. The increases reflect strong adjusted gross profit growth across both pharmacy and retail in the United States and a rebound in International segment sales and profitability due to less severe COVID-19 restrictions in the UK.

Total net earnings attributable to WBA were $1.2 billion compared with a loss of $1.7 billion in the year-ago quarter, reflecting non-cash impairment charges in the previous period, increased operating income in both segments and earnings from the company's equity method investment related to Option Care Health; this was partially offset by a higher effective tax rate driven by discrete items in the year-ago quarter. Total adjusted net earnings in constant currency increased 79.5 percent to $1.3 billion.

Total EPS2 in the third quarter was $1.38, compared with a loss of $1.95 in the year-ago quarter. Total adjusted EPS increased 83.4 percent to $1.51, up 81.4 percent on a constant currency basis.

Net earnings from continuing operations in the third quarter were $1.1 billion, up from a loss of $1.8 billion in the year-ago quarter. Adjusted net earnings from continuing operations increased 93.1 percent to $1.2 billion, up 91.6 percent on a constant currency basis compared with the year-ago quarter.

EPS from continuing operations was $1.27 compared with a loss of $2.05 in the year-ago quarter. Adjusted EPS from continuing operations was $1.38 compared with $0.71 the year-ago quarter, reflecting an increase of 93.6 percent on a constant currency basis.

Net cash provided by operating activities was $1.8 billion in the third quarter and free cash flow was $1.4 billion, a $788 million increase compared with the year-ago quarter.

Overview of Fiscal 2021 Year-to-Date Results

Sales from continuing operations in the first nine months of fiscal 2021 increased 7.2 percent from the year-ago period to $98.2 billion, an increase of 6.1 percent on a constant currency basis1.

Operating income from continuing operations in the first nine months of fiscal 2021 increased $1.1 billion from the year-ago period to $1.4 billion, with the $2 billion in non-cash impairment charges in the year-ago period partially offset by a $1.5 billion charge from the company's equity earnings in AmerisourceBergen in the first quarter of fiscal 2021. Adjusted operating income from continuing operations in the first nine months of the fiscal year was $3.9 billion, an increase of 4.2 percent from the year-ago period on a reported basis, up 3.9 percent on a constant currency basis.

For the first nine months of fiscal 2021, total net earnings attributable to WBA were $1.9 billion, compared with $83 million in the year-ago period. Total adjusted net earnings in constant currency increased 8.0 percent to $3.6 billion.

Total EPS2, including discontinued operations, was $2.21, up from $0.09 at the same time last year. Total adjusted EPS increased 11.2 percent to $4.13, up 10.3 percent on a constant currency basis.

Net earnings from continuing operations were $1.6 billion, compared with a loss of $157 million in the year-ago period. Adjusted net earnings from continuing operations increased 8.4 percent compared with the year-ago period, to $3.2 billion, up 7.6 percent on a constant currency basis.

EPS from continuing operations for the first nine months of fiscal 2021 increased to $1.89, compared with a loss of $0.18 in the year-ago period. Adjusted EPS from continuing operations was $3.74, an increase of 10.7 percent on a reported basis and an increase of 9.9 percent on a constant currency basis.

Net cash provided by operating activities was $4.3 billion in the first nine months of fiscal 2021, an increase of $912 million from the year-ago period, and free cash flow was $3.3 billion, an increase of $873 million from the year-ago period.

Company Outlook

The company raised fiscal 2021 guidance from mid-to-high single digit growth to around 10 percent growth in constant currency adjusted EPS from continuing operations. The revised guidance reflects strong results in the third quarter and greater clarity on the impact of COVID-19 vaccinations.

Fighting the Pandemic

Walgreens and Boots UK pharmacists continue to play a critical role on the front lines of the pandemic, including the following examples through June.

  • Walgreens has administered more than 25 million COVID-19 vaccinations to date and has expanded vaccination models to ensure convenient access, including same-day and walk-in appointments, mobile clinics, employer partnerships and extended hours at over 4,000 locations as part of the Biden Administration's National Month of Action in June.
  • Walgreens has administered more than 8 million COVID-19 tests to date as part of its Test & Protect efforts, including over-the-counter self tests.
  • Boots is one of the UK’s leading COVID-19 test providers with more than 3 million COVID-19 tests administered, the majority in partnership with the National Health Service (NHS), and a growing private test offering with several at home and in-store tests available, in addition to testing partnerships with several major airlines.

Selected Highlights of Progress on Strategic Priorities:

  • Creating neighborhood health destinations around a more modern pharmacy
    • WBA and VillageMD opened 46 previously announced Village Medical at Walgreens locations and plan to open the next 35 locations by the end of calendar 2021, for a total of approximately 80 co-locations.
    • As part of iA pharmacy automation efforts aimed at improving health outcomes over time by empowering pharmacists to deliver healthcare services, two micro-fulfillment centers are operating in Phoenix and Dallas; these currently support approximately 550 Walgreens locations, and will soon support approximately 1,000 locations.
    • Boots UK launched the Boots Health Hub, an innovative marketplace that serves as a gateway to Boots and third party online healthcare services.
  • Accelerating digitalization
    • Walgreens Find Care platform use increased to more than 135 million visits in the third quarter, mostly driven by COVID-19 testing and vaccinations.
    • Walgreens completed the nationwide deployment of its SAP S/4HANA front of store technology platform.
  • Transforming and restructuring the company's retail offering
    • MyWalgreens membership has grown to 75 million, up from 56 million in the second quarter.
    • Mass personalization boosted Walgreens retail sales by 100 basis points in the third quarter.
    • Walgreens debit and credit cards will launch nationwide in early fall as part of its expanded financial services offering.
    • More than 500 beauty brands are now available at Boots, with 34 new brands launched this fiscal year.
  • Driving the Transformational Cost Management Program
    • The company is on track to deliver in excess of $2 billion in annual cost savings by fiscal 2022.

Business Segments

United States:

The United States segment had third quarter sales of $28.7 billion, an increase of 5.1 percent from the year-ago quarter. Comparable sales increased 6.4 percent from the year-ago quarter reflecting an 8.4 percent increase in comparable pharmacy sales and a 1.7 percent increase in comparable retail sales.

Within comparable sales, prescriptions filled in the third quarter increased 9.8 percent from a year earlier, including a positive impact of approximately 600 basis points from COVID-19 vaccinations. Total prescriptions filled in the quarter increased 8.7 percent to 312.1 million, including immunizations, adjusted to 30-day equivalents. Pharmacy sales, which accounted for 75.7 percent of the segment's sales in the quarter, increased 6.3 percent compared with the year-ago quarter.

Retail sales increased 1.4 percent in the third quarter compared with the year-ago quarter, including adverse impacts from the store optimization programs.

Comparable retail sales increased 1.7 percent compared with the year-ago quarter, reflecting mass personalization and strength in beauty and photo aided by improved traffic trends. Comparable retail sales excluding tobacco and e-cigarettes increased 2.6 percent.

Gross profit increased 15.5 percent compared with the year-ago quarter and adjusted gross profit increased 14.5 percent, in both cases reflecting strong sales growth, favorable retail margin due to product mix and improved pharmacy margin entirely due to product mix from COVID-19 vaccinations.

Third quarter SG&A decreased by 0.4 percent, and adjusted SG&A increased by 6.5 percent, primarily driven by a negative impact of approximately 500 basis points from COVID-19 related costs, mainly related to the vaccination program, as well as higher growth investments, partially offset by cost savings related to the Transformational Cost Management Program.

Operating income in the third quarter increased to $1.2 billion compared with $528 million in the year-ago quarter. Adjusted operating income increased 50.3 percent, to $1.5 billion, reflecting strong adjusted gross profit across both pharmacy and retail, partly offset by significant costs related to the vaccination program and higher growth investments.

International:

The International segment had third quarter sales of $5.3 billion, an increase of 75.8 percent from the year-ago quarter, including a favorable currency impact of 17.1 percent. Sales increased 58.7 percent on a constant currency basis, which includes the impact of the company's wholesale joint venture in Germany, which was consolidated as of November 2020. Excluding incremental sales from the joint venture, International segment sales on a constant currency basis increased 12.1 percent, reflecting a partial recovery in the UK market as COVID-19 restrictions were eased.

Boots UK comparable pharmacy sales increased 3.7 percent compared with the year-ago quarter, reflecting stronger pharmacy services and favorable timing of NHS reimbursement, partially offset by lower prescription volume.

Boots UK comparable retail sales increased 38.7 percent compared with the year-ago quarter. Footfall on the high street showed early signs of recovery amid a partial easing of strict lockdown measures, though travel locations in airports and train stations continued to face challenges.

Boots.com continued to perform strongly, with sales growth of 42.3 percent compared with the year-ago quarter.

Gross profit increased 55.0 percent compared with the year-ago quarter, including a favorable currency impact of 16.3 percent. Adjusted gross profit increased 38.6 percent on a constant currency basis, reflecting the ongoing recovery in UK retail sales.

SG&A in the quarter decreased 63.9 percent from the prior year quarter to $1.0 billion, including an adverse currency impact of 3.8 percent and the non-cash impairment charges in the year-ago quarter. On a constant currency basis, adjusted SG&A increased 5.2 percent, due entirely to the higher SG&A associated with the formation of the Germany joint venture. Excluding the Germany joint venture impact, both SG&A and adjusted SG&A decreased, reflecting cost savings from the Transformational Cost Management Program.

Operating income, including a favorable currency impact of 0.1 percent, was $36 million compared with a loss of $2.2 billion, which was primarily a result of the non-cash impairment charges. Adjusted operating income was $94 million, an increase of $222 million on a constant currency basis compared with the year-ago quarter, reflecting less severe UK COVID-19 restrictions, Boots.com performance and cost management actions.

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  • Full name
    Walgreens Boots Alliance, Inc.
  • Registration country
    USA
  • Industry
    Trade and retail