-=Walgreens Boots Alliance (WBA) reported earnings on Tue 27 June 23 (b/o)

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Walgreens Boots Alliance misses by $0.07, beats on revs; guides FY23 EPS below consensus; immediate actions to improve profitability including $600 million of incremental cost savings

• Reports Q3 (May) earnings of $1.00 per share, $0.07 worse than the FactSet Consensus of $1.07; revenues rose 8.6% year/year to $35.41 bln vs the $34.23 bln FactSet Consensus.
• Co issues downside guidance for FY23, sees EPS of $4.00-4.05 vs. $4.45 FactSet Consensus. For the full fiscal year 2023, Walgreens Boots Alliance now expects adjusted EPS of $4.00 to $4.05 from $4.45 to $4.65 previously, reflecting challenging consumer and macroeconomic conditions, and lower COVID-19 vaccine and testing volumes.
  • The fourth quarter is expected to be negatively impacted by a higher effective tax rate, shifting U.S. consumer spending with heightened macro pressures, and the impact of a weaker respiratory season for both U.S. Retail Pharmacy and U.S. Healthcare. Despite these challenges, the Company expects adjusted operating income growth to accelerate in the fourth quarter from 0.6 percent in the third quarter.
• For the fiscal year 2024, Walgreens Boots Alliance is providing preliminary expectations for low- to mid-single digit adjusted operating income growth, with the U.S. Healthcare and U.S. Retail Pharmacy performance more than offsetting headwinds from lower sale and leaseback program benefits, lower COVID-19 contribution, and the sale of holdings in AmerisourceBergen.
  • Adjusted operating income growth is expected to outpace adjusted EPS due to a higher tax rate and a negative impact from non-controlling interest.
• The Company is taking immediate actions to drive sustainable growth including:
  Raising the Transformational Cost Management Program target from $3.5 billion to $4.1 billion in cumulative savings by fiscal 2024; expecting cost savings of $800 million in fiscal 2024
  • Implemented capital and project spend reductions; working capital optimization program launched, benefiting fiscal 2024
  • Advancing portfolio simplification to pay down debt and fund strategic initiatives
  • Announcing swift actions to improve the U.S. Healthcare path to profitability, including realigned CityMD costs, accelerated VillageMD patient panel build, aggressive integration of prior Summit Health acquisitions, upgraded VillageMD management, and an increased and accelerated synergy target for VillageMD/Summit Health
  • Accelerating synergies between U.S. Healthcare and Walgreens operations