Walgreens swings to a quarterly loss as coronavirus drives up costs, lowers doctor visits; shares fall

A customer views merchandise for sale at a Walgreens store in the Hollywood neighborhood of Los Angeles.

Christopher Lee | Bloomberg | Getty Images

Walgreens Boots Alliance said Thursday its fiscal third quarter results were hurt by fewer people going to the doctor and getting prescriptions and by higher costs during the pandemic.

The drugstore chain said its profits were dragged down primarily by its non-U.S. business, particularly in the United Kingdom. They were also squeezed by increased sales of low margin items, higher supply chain costs and higher expenses for labor and store cleaning.

Walgreens shares were down 3% in premarket trading.

Here’s what Walgreens reported compared with what analysts were expecting for the third quarter ended May 31, based on Refinitiv data:

  • Earnings per share: 83 cents, adjusted vs. $1.17 expected
  • Revenue: $34.63 billion vs. $34.36 billion expected

In the third quarter, Walgreens posted net loss of $1.71 billion,  or $1.95 per share, compared with earnings of $1.03 billion, or  $1.13 per share, a year ago.

The loss in the latest quarter included between 61 cents and 65 cents per share in Covid-19-related costs and impacts. With one-time adjustments, Walgreens earned 83 cents per share. 

Sales rose slightly to $34.63 billion from $34.59 billion a year ago. 

The drugstore chain has been cutting costs in some areas, while also experimenting with new business models. It’s testing a new small-format pharmacy and on Wednesday, it announced it struck a deal with VillageMD to open doctor offices in 500 to 700 of its U.S. stores over the next five years.

It’s also sought to turn some of its more than 9,200 U.S. stores into “neighborhood health destinations” — a term it uses to describe locations with health care services along with a pharmacy. In some stores, for example, it rents space to diagnostics company LabCorp, optical company For Eyes and weight loss company Jenny Craig. It wants to further that aim with the hundreds of primary-care clinics staffed and run by VillageMD.

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