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Analysis

Walgreens Posts $1.6B Operating Loss in Q3, Suspends Share Buybacks

By Jack O'Brien  
   July 09, 2020

The earnings release came one day after Walgreens announced its primary care partnership with VillageMD.

Walgreens Boots Alliance reported an operating loss of $1.6 billion during Q3 2020 and announced the suspension of its share buybacks program, according to its latest earnings report released Thursday morning.

Walgreens' business was hampered significantly by the ongoing coronavirus disease 2019 (COVID-19) pandemic, causing an adverse sales impact of between $700 million to $750 million. Additionally, the company's adjusted net earnings fell nearly 46% year-over-year.

Unlike Q3 2019, when Walgreens posted earnings per share (EPS) of $1.13, the Chicago-based company reported a loss per share of $1.95 in Q3 2020. Its adjusted EPS slid 43.8% year-over-year as well.

The earnings release came one day after Walgreens announced its primary care partnership with VillageMD.

Related: Walgreens and VillageMD to Open Hundreds of Primary Care Offices in Retail Locations

For the first nine months of fiscal year 2020, the company did see its net cash provided by operating activities increase $183 million year-over-year to $3.4 billion, while its free cash flow ballooned to $2.4 billion, an increase of 23.7%.

C-suite perspective:

"Prior to the pandemic our financial performance for fiscal 2020 was on track with our expectations. However, this unprecedented global crisis led to a loss in the quarter as stay-at-home orders affected all of our markets," Stefano Pessina, CEO of Walgreens, said in a statement. "I'm very proud of how all of our teams mobilized and adapted to deliver essential services in our communities across the world. Shopping patterns are evolving more rapidly than ever as consumers further embrace digital options, spurring us to accelerate our ongoing investments in digital transformation and neighborhood health destinations. This includes our two recent announcements: a significant expansion of our primary care clinics collaboration with VillageMD, and our strategic partnership with Microsoft and Adobe to launch a personalized omnichannel healthcare and shopping experience."

Despite the pandemic's negative impact on the business, sales did inch higher by 0.1%, led by the retail pharmacy USA segment posting comparable sales growth of 3% during the quarter.

Related: As Coronavirus Surges, Walgreens Healthcare Sales Jump But Store Foot Traffic is Down

Related to its strategic initiatives, Walgreens increased its annual cost savings target from $1.8 billion to more than $2 billion by fiscal year 2022.

Related: Walgreens, Humana, CHOP Urge Consumers: Don't Delay Needed Healthcare

Forward looking, Walgreens expects to report an adjusted EPS between $4.65 to $4.75 for 2020.

ADDITIONAL Walgreens Q3 EARNINGS REPORT HIGHLIGHTS:

  • Walgreens' quarterly dividend rose 2.2% in Q3 2020.
  • The company's operating and adjusted income registered an adverse impact of between $700 million to $750 million.
  • By the end of the three-year investment, Walgreens will hold about a 30% stake in VillageMD. 

For complete financial information, review Walgreens' filing with the Securities and Exchange Commission.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

Photo credit: RUSSIA, KAZAN MAY 1, 2019: Walgreen Company logo seen displayed on smart phone / Editorial credit: Allmy / Shutterstock.com


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