Walgreens Reported Top-Line Fall for First Time in 4 Years



WBA’s top line fell 1.8% on unfavorable currency rates

Walgreens Boots Alliance (WBA), the second-largest pharmacy retail chain in the United States in terms of sales, reported fiscal 1Q17 results on January 5, 2017. Its top line fell 1.8% YoY (year-over-year) in the quarter to $28.5 billion. The company missed consensus revenue estimates for the fifth consecutive quarter.

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What were the key revenue drivers in fiscal 1Q17?

In fiscal 1Q17, WBA reported a top-line fall for the first time in the last 16 quarters. However, the fall in revenues was primarily due to currency headwinds. Ignoring the negative impact of currency fluctuations, revenues rose 1.0% YoY.

Sales from WBA’s Retail Pharmacy USA division rose 1.4% YoY. The Retail Pharmacy International and Pharmaceutical Wholesale divisions fell 14.4% and 6.5%, respectively, mainly due to unfavorable exchange rates.

Pharmacy sales in the United States got a boost from WBA’s recent partnerships with pharmacy benefit managers and insurance companies. That raised the company’s prescription drug and non-drug item sales.

If you want exposure to WBA, you can consider the iShares US Consumer Services (IYC). IYC invests 2.4% in WBA.

How did competitors perform?

WBA’s closest competitor, CVS Health (CVS), has remained strong over the past year and delivered an average quarterly top-line growth of ~16.0% during the last four quarters. However, it missed top-line consensus estimates in two of those four quarters.

Rite Aid’s (RAD) performance has been unimpressive. Its top-line growth fell from 23.0% in fiscal 1Q17 to -0.80% in fiscal 3Q17, its most recent quarter. The company missed the consensus top-line forecasts in all those quarters.

Next, let’s look at WBA’s headwinds for its international business.


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