Walgreens is ‘just not very good at retailing,’ analyst says after lukewarm second-quarter earnings

Pharmacy chain Walgreens posted better-than-expected earnings on Thursday, but analysts lack confidence in its ability to recover. difficult for several years about the decrease in demand for the COVID vaccine and treatment and the increase in sales competition.

Walgreens beat earnings estimates, posting a 6.3% increase in annual sales to $37.1 billion, and a 3.4% increase in earnings per share of $1.20. But everyone else report tells the story of a very fragile company: It reported a loss of $13.2 billion – $12.4 billion of which was non-cash interest, or write-downs related to VillageMD health care providers, which it plans to close. 160 unprofitable sites. The losses prompted Neil Saunders, GlobalData’s chief executive, to call the earnings season “another bad quarter.”

“While these products are technological improvements, they underscore the bad decisions Walgreens has made over the past few years and its various challenges in healthcare,” Saunders wrote in a statement Thursday. “With the business focused on driving profitability under the new CEO, Walgreens had to take steps to get back to the things it felt were most important to the future.”

Walgreens expects its challenges, especially in combination with the revenue it gained from its February sales $992 million in shares of pharmaceutical company Cencorawhich pushed the company to lower its full-year adjusted earnings per share from $3.50 to $3.35. The company expects to save $1 billion over the course of a year. CEO Tim Wentworth—who took over at Walgreens last October after a difficult period employee mobility due to operational issues – rather it reflects Walgreens’ future challenges to the retail business, which has struggled due to consumers’ reluctance to purchase smart products.

Walgreens reported sales growth of 4.7% on the drug side of the business due to inflation and drug costs, but 4.5% overall sales decline on the sales side. Deloitte Day ConsumerSignals report It shows that discretionary spending intentions are still cheap, which has declined since the pandemic has recovered.

“We rely on people to come in and not just visit our store, but to come in, buy what they want, buy last-minute products, buy seasonal products,” Wentworth said. he told Bloomberg TV Thursday. “A lot of those things are purchases that you have to factor in the price or they feel like it’s right for people.”

Competitor CVS has similar problems. They all announced backtracking on medical basics last fall after rising drug prices and a decline in demand for pandemic treatment reduced store traffic. Bankrupt Rite Aid, another drug chain, also closed a combined 1,500 stores. In addition, the weak respiratory season means that fewer people buy muscle and non-pharmaceutical products.

Changes in sales channels

To be sure, Walgreens has taken some major changes to attract cash-strapped customers. A Walgreens spokesperson said Chance that the chain is “responding to these market forces by investing in the most important things, and looking at our ability to deal with customers in a more targeted way.” Walgreens introduced 37 new products last quarter and is using stock to determine which products are the most popular with consumers.

While customers are shopping for convenience items at Walgreens, they’re going elsewhere for bargains, Saunders said. Walgreens has been losing especially in the beauty sector, where customers are willing to spend more, but are turning to competitors. Objectives and Ulta, which offers a large and affordable selection. Walgreens isn’t slowing down sales because of consumers who don’t want to spend money, Saunders said. You are losing money because consumers are going elsewhere to buy better products.

“Basically, Walgreens is losing because it’s not very good at selling,” he said.

But Wentworth also emphasized the importance of brick-and-mortar Walgreens, saying Thursday that customer service is what separates it from ecommerce giants like. Amazon.

“We’re going to beat Amazon because of the people view that we provide in communities and regions,” he said he told CNBC.

Saunders said Chancehowever, that Walgreens is not known for its customer service, and because customers like Walgreens because of its convenience, they often don’t need much help.

“Walgreens’ idea that it has a strong stake in the chain is a matter of wishful thinking,” Saunders said.

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