Walgreens touts partnership strategy

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Walgreens touts partnership strategy

By Gina Acosta - 10/11/2018
This week Walgreens said it would test grocery pickups at stores through a partnership with Kroger.

Walgreens touted its partnership strategy as key to driving growth on the same day that a new earnings report showed same store sales continue to decline at the drug chain.

In a conference call with analysts, Walgreens Boots Alliance CEO Stefano Pessina said he believes that partnerships, and not acquisitions, will drive growth at Walgreens: particularly, teaming up with firms whose with skills and expertise can either accelerate Walgreens' own work and or bring Walgreens capabilities it could not easily develop itself.

"We have continued to improve the operational performance of our core businesses and at the same time, we have done a great deal to advance the overall transformation of our company," Pessina said.

This week Walgreens said it would test grocery pickups at stores through a partnership with Kroger.

Last week Walgreens announced plans to partner with digital beauty subscription company Birchbox to test a concept in Walgreens stores where shoppers can fill a kit with makeup, hair and skincare samples.

Earlier this year Walgreens and LabCorp announced plans to expand their existing partnership and bring specimen collection sites to at least 600 Walgreens stores. 

"We think we've done a good job on the front end in terms of shifting the emphasis to become more of a health, beauty, wellness expert, and there's a lot more to go," co-chief operating officer Alex Gourlay told analysts. "And it's maybe taking us longer than we had first anticipated, but the signs are very clear where we're heading to and the transition is well under way."

For the fourth quarter ended Aug. 31, same store sales at Walgreens fell 1.9% from a year earlier in the U.S. (its eighth same store sales decline in as many quarters), weighed by less demand in the general-merchandise and personal-care categories. Comparable retail sales in its international segment fell 0.9% on a constant-currency basis.

Overall sales rose 11% to $33.44 billion, as growth in prescription volumes helped lift pharmacy sales. Walgreens said U.S. pharmacy sales rose 17%, due primarily to its acquisition of stores from Rite Aid.

Walgreens reported net income of $1.5 billion, or $1.55 per share, up from from $802 million, or 76 cents per share, a year earlier. Excluding items, Walgreens earned $1.48 per share.

Walgreens' U.S. retail pharmacy sales increased to $25.5 billion in the quarter, a 14.4 percent increase from last year. It attributed the increase to prescriptions filled from its acquisition of Rite Aid stores and gains from mail-order pharmacy sales for specialty drugs.

For the next fiscal year, Walgreens forecast adjusted earnings per share to range from $6.40 to $6.70.

Walgreens and other drug chains are rethinking their businesses as Amazon and other e-commerce businesses have pressured drug chain sales. Amazon further pressured pharmacies this summer when announcing plans to acquire online pharmacy PillPack.

Meanwhile CVS Health is trying to get ahead of the transformative forces in chain drug retail by acquiring Aetna, a deal that the Justice Department gave preliminary approval on Wednesday.

Walgreens Boots Alliance is the largest retail pharmacy, health and daily living destination across the U.S. and Europe with more than 18,500 stores in 11 countries as well as one of the largest global pharmaceutical wholesale and distribution networks, with more than 390 distribution centers delivering to more than 230,000 pharmacies, doctors, health centers and hospitals each year in more than 20 countries.

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