Walgreens Boots Alliance Inc announced on June 30, 2022, that it maintained its full-year earnings forecast amid declining demand for COVID-19 vaccines despite the drugstore retailer beating quarterly estimates owing to its strong UK-based Boots business. The company reported a net profit of $289 million for Q3 2022, which showed a 3% decrease over that for Q2 2022. Revenue fell to $32,597 million in the third quarter of 2022 from $33,756 million in the previous quarter. The retail pharmacy company said that it still expects low single-digit growth in adjusted earnings in 2022 and warned about costs associated with labor investments and its new consumer health business.
The Overreliance of Walgreens on COVID-19 Vaccines
Walgreens benefited from the gains in administering COVID-19 vaccines in recent quarters to offset losses due to reduction in the number of prescriptions and over-the-counter sales of health and wellness products due to the pandemic. The company reported reduction in sales and profit as a result of decreasing rate of COVID-19 vaccination, investments in the healthcare business, and a settlement with the State of Florida over opioids.
Walgreens Shelves Boots UK Sale
Boots is the leading health and beauty retailer in the UK, and the US company made significant investment in Boots and turned it into the No. 7 beauty company since the formation of Walgreens Boots Alliance at the end of 2014. On June 27, Walgreens Boots Alliance abandoned plans to sell its UK high street pharmacy chain, Boots. The decision to cancel the sale comes as private equity bidders Apollo Global and TDR faced difficulties in raising financing for the transaction. Global economic uncertainty and rising inflation led to an increase interest rates as central banks implemented the most widespread tightening of monetary policy in more than two decades, making deal financing more expensive and difficult to carry out.
Outlook
Walgreens CEO Rosalind Brewer stated on June 30 that the company will continue to investigate strategic divestment options. In 2021, the company launched Walgreens Health, a unit that provides pharmacy and primary care services in stores, at home or a doctor's office, and via mobile app with focus on digital health. Walgreens strives to expand its Walgreens Health business, which the company expects to account for a significant portion of future earnings growth.
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