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Strong Performance for Walgreens’s Retail Pharmacy USA Division

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Jan. 11 2017, Updated 7:37 a.m. ET

Sales for Retail Pharmacy USA rose 1.4% YoY in fiscal 1Q17

Retail Pharmacy USA, Walgreens Boots Alliance’s (WBA) largest business segment, accounts for 70.0% of the company’s top line and 75.0% of its operating income. The company operates about 8,200 pharmacies across the United States.

In fiscal 1Q17, sales for the Retail Pharmacy USA division, which is comprised of WBA’s pharmacy and retail businesses, rose 1.4%. It was the only segment that reported sales growth since the other two segments, as we saw in the previous part, were impacted by currency fluctuations.

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Evaluating 1Q17 performance

Growth for WBA’s Retail Pharmacy USA division was driven by a 2.5% rise in the Pharmacy segment’s sales, which accounts for ~70.0% of the division’s total sales. Partially offsetting this growth was a 0.90% fall in retail sales since the company closed some of its e-commerce operations and recorded a 0.50% fall in retail comps (comparables).

Comparable sales of the Pharmacy segment rose 2.0% since the company benefited from continued growth in the Medicare Part D volume. In comparison, CVS Health (CVS) reported comps growth of 2.1%, and Rite Aid (RAD) reported comps of -2.5% in their last reported quarters.

Prescriptions filled in comparable WBA stores rose 3.4% and resulted in a ~40 basis point increase in retail prescription market share to 19.5% during the quarter.

A look at margins

Adjusted operating income from the Retail Pharmacy USA division rose 3.7% YoY to $1.3 billion since the company continued to benefit from its $1.5 billion cost transformation program. Under that program, WBA has been working toward reducing costs through restructuring stores, eliminating inefficient promotions, and reorganizing divisional and field operations.

If you want exposure to WBA, you can consider the Vanguard Consumer Staples ETF (VDC). VDC invests 3.7% of its portfolio in WBA.

We’ll look at the profitability of the entire company in the next part of this series.

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