Wane in Covid demand hurts Walgreens as profits drop to $118m

Walgreens Boots Alliance has set its sights on a cost-saving path as the pharmacy giant battles mixed financial results.

In its fiscal 2023 third-quarter results released on Tuesday, Walgreens revealed that profits had dropped to $118m, down from $289m in the same period from 2022. In light of this, the company adjusted earnings per share (EPS) guidance to $4.00 to $4.05 from $4.45 to $4.65.

In a statement, CEO Rosalind Brewer blamed the “significantly lower demand for COVID-related services.” Walgreens, which operates the second-largest pharmacy store chain in the US, saw success during the Covid-19 pandemic when it offered a plethora of Covid-related services such as vaccines and tests. However, in May, the World Health Organisation (WHO) declared an end to the Covid-19 public health emergency – and now pharmacy chains are starting to see the reality of smaller profits in a post-pandemic world. 

In more positive financial results, Walgreens saw sales growth of 8.6%, to hit total sales of $35.4bn. The company pointed to a significant contribution from the retail pharmacy and healthcare segments.

The company stated it is taking actions to raise its “transformational cost management programme” target from $3.5bn to $4.1bn in total savings.

Shares in Walgreens dipped around 9% following the results.

“Consumers continue to appreciate the value, convenience, and range of services provided by Walgreens and Boots. However, significantly lower demand for COVID-related services, a more cautious and value-driven consumer, and a recently weaker respiratory season created margin pressures in the quarter,” said Brewer.

“Our revised guidance takes an appropriately cautious forward view in light of consumer spending uncertainty, while still demonstrating clear drivers of a return to operating growth next fiscal year.”