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A Sneak Peek at Walgreens’ Fiscal 2016 Top-Line Performance

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Walgreens’ fiscal 2016 performance overview

Walgreens Boots Alliance (WBA) posted strong results in fiscal 2016. Revenues rose 13.4% YoY (year-over-year), and EPS (earnings per share) rose 18.3% over the previous year. However, most of the gains came from the company’s acquisition of Alliance Boots.

WBA continued to face currency headwinds throughout the year and missed Wall Street’s revenue estimates in all four quarters. Excluding exchange rate fluctuations, the company’s top line rose 16.0% during the year.

In comparison, its competitor CVS Health (CVS) recorded a 10.0% rise in total sales in the last reported fiscal year.

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What drove fiscal 2016 sales?

Walgreens’s Retail Pharmacy US division recorded a 3.5% rise in sales, primarily driven by a rise in Medicare Part D prescriptions. The division accounted for 20.0% of the company’s fiscal 2016 revenue change, while the remaining 80.0% came from the integration with Alliance Boots.

After the merger with Alliance Boots, WBA began reporting its business in the following three segments:

  • Retail Pharmacy USA, the legacy Walgreens business
  • Retail Pharmacy International, the legacy Alliance Boots pharmacy
  • Pharmaceutical Wholesale, the legacy Alliance Boots pharmaceutical wholesaling and distribution business

Retail Pharmacy USA is the largest segment, accounting for 71.5% of WBA’s sales and 74.0% of its operating profit in fiscal 2016. WBA’s proposed acquisition of Rite Aid (RAD) will be included in the Retail Pharmacy USA division.

If you’re looking to add exposure to WBA, you can consider the iShares US Consumer Services (IYC). IYC invests 2.5% of its portfolio in WBA.

Next, let’s look at WBA’s top-line drivers in 4Q16 and the expected sales performance for fiscal 2017.

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