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Walgreens Delivers Strong Top-Line Growth in 1Q18

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Jan. 10 2018, Updated 3:45 p.m. ET

WBA reports solid quarterly sales growth

As we’ve discussed, Walgreens Boots Alliance (WBA) reported its 1Q18 results on January 4. The company’s top line increased 7.9% YoY (year-over-year) to $30.74 billion. On a constant-currency basis, sales were up 7.2%, which was the company’s strongest performance over the last year and a half.

The company beat Wall Street expectations of $30.35 in first-quarter sales. A rise in prescription volumes for the US retail pharmacy division lifted the company’s total sales.

“I am pleased that we delivered another strong performance in the first quarter, led by continued prescription volume and market share growth in Retail Pharmacy USA,” said Stefano Pessina, executive vice chairman and CEO of Walgreens.

See the next part of this series to learn more about the key 1Q18 top-line drivers

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How have competitors performed lately?

CVS Health (CVS), America’s largest pharmacy chain, reported a 3.5% YoY increase in its top line for the quarterly results reported in November. The company outperformed consensus expectations for $10 million.

Rite Aid (RAD), which reported its quarterly results a day before WBA, saw its top line fall 5.6% YoY to $5.35 billion (excluding discontinued operations). It was the third consecutive quarter of sales declines for the company.

RAD store transfer on track

Rite Aid initiated the process of transferring stores and related assets to Walgreens during the quarter. Walgreens purchased 1,932 stores and three distribution centers in a $4.37 billion deal with Rite Aid in September last year. The company has successfully transferred 357 stores to Walgreens for net proceeds of about $715 million. The integration of the acquired stores is expected to complete by the end of fiscal 2020.

Walgreens plans to spend $500 million in the renovation of Rite Aid stores. It also plans to close those stores that are too close to existing Walgreens stores or aren’t profitable.

Investors looking for exposure to Walgreens Boots Alliance and Rite Aid can consider investing in the Vanguard Consumer Staples ETF (VDC), which invests 3.2% of its portfolio in the two companies.

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