Walgreens Boots Q2 Earnings Top Estimates, Margins Down

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Walgreens Boots Alliance, Inc. (WBA - Free Report) reported adjusted earnings per share (EPS) of $1.16 in second-quarter fiscal 2023, down 27.2% year over year (declining 25.8% at a constant-exchange rate or CER). The figure topped the Zacks Consensus Estimate by 5.5%.

GAAP EPS in the second-quarter fiscal 2023 was $0.81 compared with the year-ago quarter’s earnings of $1.02, falling 20.3%.

Total Sales

Walgreens Boots recorded total sales of $34.86 billion in the fiscal second quarter, up 3.3% year over year and up 4.5% at CER. The top line surpassed the Zacks Consensus Estimate by 4.2%.

Quarterly Details

The company divided its business into three reportable segments — the United States, International, and Walgreens Health — at the start of the fiscal year. During the fiscal Q4 announcement, Walgreens Boots stated that it had changed the names of two reportable segments to better align with its business activities, structure, and strategy. The United States segment has changed to U.S. Retail Pharmacy and the Walgreens Health segment has been renamed to U.S. Healthcare.


U.S. Retail Pharmacy

The segment’s sales totaled $27.6 billion for the fiscal second quarter, representing a decline of 0.3% year over year.

Comparable sales increased by 3.1% from the year-ago quarter’s levels.

Pharmacy sales were up 0.3% from the year-ago quarter’s figures, affected by a 3.5% point headwind from the AllianceRx Walgreens business.

Retail sales fell 1.8% and comparable retail sales were down 1% year over year. Comparable retail sales (excluding tobacco and e-cigarettes) also fell 0.5% from the prior-year quarter.


Revenues in the International division rose 1.6% on a year-over-year basis and increased 9% at CER to $5.7 billion in the fiscal second quarter.

Walgreens Boots Alliance, Inc. Price, Consensus, and EPS Surprise

Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise

Walgreens Boots Alliance, Inc. price-consensus-eps-surprise-chart | Walgreens Boots Alliance, Inc. Quote

Boots UK sales rose 11% year over year. In Germany, wholesale business sales increased by 7.5% in the fiscal second quarter.

Boots UK’s comparable retail sales increased by 16%. However, Boots UK’s comparable pharmacy sales rose 2% year over year, primarily due to lower demand for COVID-19 services.

U.S. Healthcare

U.S. Healthcare reported fiscal second-quarter revenues of $1.6 billion. This was up 30% on a pro-forma basis versus the year-ago quarter’s combined result.

Within the segment, the Shields business rose 41%, driven by recent contract wins, further expansion of existing partnerships, and strong execution focus. VillageMD increased 30% owing to existing clinic growth and footprint expansion. CareCentrix grew 25% as a result of additional service offerings with existing partners.


Gross profit for the reported quarter fell 8.5% year over year to $7.01 billion. Gross margin contracted 260 bps to 20.2%.

Selling, general and administrative expenses rose 5.6% year over year to $6.93 billion.

The company reported an adjusted operating profit of $0.1 billion for the quarter under review compared to $1.1 billion of operating profit in the year-ago period. Adjusted operating margin contracted 304-bps to 0.3%.

Financial Condition

Walgreens Boots exited second-quarter fiscal 2023 with cash and cash equivalents of $1.09 billion compared with $2.35 billion recorded in the first quarter of fiscal 2023. Total debt was $13.04 billion at the end of the fiscal second quarter, up from $11.72 billion at first-quarter fiscal 2023.

Net cash provided by operating activities at the end of second-quarter 2023 was $1.24 million, down from the year-ago period’s $2.18 billion.

The company has a five-year annualized dividend growth rate of 3.31%.

Fiscal 2023 Guidance

The company reinstated its full-year fiscal 2023 guidance

Adjusted EPS guidance is expected in the range of $4.45 to $4.65. The current Zacks Consensus Estimate is pegged at $4.57.

The company expects revenue to be $137.5 billion. The current Zacks Consensus Estimate is pegged at $134.6 billion.

Our Take 

Walgreens Boots exited second-quarter fiscal 2023 with better-than-expected earnings and revenues. The company’s U.S. Healthcare business grew, led by key contract wins, continued partnership growth, and a strong focus on execution. The company continues to play a leading role in COVID-19 vaccinations and testing, administering 2.4 million vaccinations in the reported quarter. Moreover, the company has reinstated 2023 eps guidance, reflecting continued growth momentum.     

However, Pharmacy sales were affected by a 3.5% point headwind from AllianceRx Walgreens. The international segment was also impacted by an adverse currency impact of 7.5%in the second quarter.  Escalating costs and contraction of gross margin remain a concern.

Zacks Rank and Upcoming Releases

Walgreens currently carries a Zacks Rank #3 (Hold).

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