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WBA’s first quarter earnings beat expectations

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DEERFIELD, Ill. — Walgreens Boots Alliance (WBA) posted first quarter sales and earnings that topped analysts’ forecasts.

WBA reported adjusted earnings per share of $1.16, surpassing the expected $1.14. Revenue for the three-month period ended November 30 was $33.38 billion, ahead of the projected $32.84 billion.

Walgreens’ front-end sales grew 0.8%, with same-store sales rising 1.4% from the year-ago quarter. Excluding tobacco, same-store front-end sales advanced 2.1%, aided by strong cough/cold/flu sales representing a tailwind of 220 basis points, partly offset by lower sales of over-the-counter test kits representing a headwind of 170 basis points. Beauty and personal care categories both grew, benefiting from owned brand offerings and improved inventory availability.

The strong sales notwithstanding, the company had a net loss of $3.7 billion, or $4.31 per share, compared with net income of $3.58 billion, or $4.13 per share, a year earlier. The loss resulted from a $5.2 billion settlement with a number of states over opioid lawsuits.

“WBA delivered a solid start to the fiscal year, as we continue to accelerate our transformation to a consumer-centric health care company,” said chief executive officer Roz Brewer. “We’re making significant progress in driving our U.S. Healthcare segment to scale and profit, including the recent VillageMD acquisition of Summit Health. Our core retail pharmacy businesses in both the United States and United Kingdom remain resilient in challenging operating environments. Execution across segments reinforces our confidence in achieving full-year guidance, and our strategic actions are creating long-term shareholder value.”

Sales decreased 1.5% from the year-ago quarter, but increased 1.1% on a constant currency basis. Excluding the negative impact from AllianceRx Walgreens of 485 basis points and the positive contributions from U.S. Healthcare M&A of 280 basis points, sales growth was 3.2% on a constant currency basis.

The impact of the opioid lawsuit settlement was offset by a $900 million after-tax gain from the partial sale of the company’s equity method investment in AmerisourceBergen during the first quarter, and lapping $2.5 billion after-tax gain on investments in VillageMD and Shields Health Solutions in the year-ago quarter. Adjusted net earnings were $1 billion, down 30.2% on a constant currency basis, primarily driven by lower adjusted operating income partly offset by the favorable impact of a lower tax rate compared with the year-ago quarter, primarily due to the release of valuation allowance related to capital loss carryforwards.

Adjusted earnings per share decreased 30.8%, reflecting a decrease of 29.9% on a constant currency basis.

WBA raised its full-year sales guidance from $133.5 billion to $137.5 billion, in part due to the Summit Health acquisition.