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Discussing Walgreens’s Top Line, Pre-2Q18 Results

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What’s expected for Walgreens in 2Q18

The second quarter of 2018 is expected to be one of Walgreens Boots Alliance’s (WBA) strongest quarters in two years. The results are set to be posted on March 28. The pharmacy giant’s sales are projected to increase 9.5% YoY (year-over-year) to $32.2 billion. It has seen average sales growth of 2% during the last seven quarters.

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How did the company perform in 1Q18?

The company outperformed top- and bottom-line expectations during 1Q18. However, investors seemed to be worried about ongoing reimbursement pressures and generic deflation hampering WBA’s US retail business.

Nevertheless, the company’s top line rose 7.9% YoY to $30.7 billion, driven by higher prescription volume and market share gains in its Retail Pharmacy USA segment. Comparable pharmacy sales rose more than 7%, and the company recorded a 9% jump in prescriptions filled in comparable stores. The company benefited from previously announced strategic partnerships and Medicare-Part-D-associated growth.

However, US retail business remained weak. Same-store sales fell for a sixth consecutive quarter. Weak demand for personal care products and general merchandise hit the retail business, which fell 2.8% in 1Q18. The recent softness in Walgreens’s retail sales has raised doubts about the company’s ongoing acquisition of 1,932 Rite Aid stores.

The company’s retail pharmacy international sales have also remained soft for quite some time. Though sales rose 4% in 1Q18 after six consecutive quarters of decline, this improvement was driven mainly by currency gains. On a constant-currency basis, sales fell 0.8% YoY during the quarter.

The international pharmaceutical wholesale business grew 5.6% YoY during 1Q18. However, the growth fell short of management’s expectations due to challenging conditions in Continental European markets.

Investors looking for indirect exposure to WBA could consider the Van Eck Retail ETF (RTH), of which WBA makes up 4.3%. Continue to the next section for a view of the company’s profitability and margin expectations for 2Q18.

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