Walgreens’ Share Price Is Plummeting: Here’s Why

Walgreens (WBA) saw its share price slip over 6% on Wednesday morning with the release of its fiscal first quarter earnings report, missing analyst expectations.

The drugstores and pharmacy retailer saw sales increase by 1.6% to $34.3 billion compared to a Refinitiv survey of analysts (via CNBC) that had expectations of $34.6 billion while its operating income decreased 27.6 percent to $1 billion. EPS decreased 19.8% to $0.95 with adjusted EPS down 6% to $1.37 compared to analyst expectations of $1.41 from the same survey.

“We are maintaining our outlook for the year despite a soft first quarter,” Stefano Pessina, executive vice chairman and CEO said in a statement. “We are confident our strategic plans are the right ones to drive long-term sustainable growth going forward. In addition, during the quarter we were very satisfied with the progress made in our Transformational Cost Management Program and with the strong cash flow we delivered.”

Walgreens’ retail pharmacy business in the U.S. had first-quarter sales of $26.1 billion, up 1.6% over Q1 2019. Comparable store sales also increased by 1.6%, with pharmacy sales increasing by 2.9% compared to the same quarter last year, which Walgreens attributed to higher brand inflation and prescription volume.

According to the retailer, 294 million prescriptions were filled in the quarter, up 1.4% compared to Q1 2019. But despite seeing increasing prescription volumes for the quarter, the retailer was reportedly faced with lower volumes that it expected as well as reduced payments by insurers.

Other struggles the retailer faced in the quarter was more competition from online retailers as consumers look to e-commerce purchases for daily household needs, CNBC reported.

Retail sales for the company also decreased by 2.2%, with comparable retail sales down 0.5% for the quarter, which Walgreens said was due to the exit of tobacco sales. Internationally, Walgreens saw its retail pharmacy sales dip by 5.4% to $2.7 billion.

For fiscal 2020, Walgreens provided an outlook of “roughly flat growth” but said it was on track to deliver in excess of $1.8 billion in annual cost savings in time for fiscal 2022. The company cited its after-quarter ventures with McKesson – a German wholesale – and its new partnership with Kroger for group purchasing as new growth opportunities for the company.

Shares of Walgreens stock were down 6.05% as of 11:19 a.m. EST on Wednesday.