Walgreen CEO ‘still positive’ on Rite Aid deal
Walgreens Boots Alliance (WBA) reported second-quarter revenue that fell short of forecasts Tuesday and continues to see its drawn-out merger with smaller rival Rite Aid (RAD) getting regulatory approval by the end of July despite ongoing uncertainty.
Estimates: EPS to rise 4% to $1.36; revenue to tick up 0.2% to $30.25 billion.
Results: EPS of $1.36 on revenue of $29.45 billion. Same-store sales at U.S. retail pharmacies rose 2.4%. Prescriptions filled at comparable stores climbed 7.9%, and market share widened to 20.4% from 19.4% a year ago. Reimbursement pressure and generics weighed on comp growth, partly offset by brand inflation.
Front-end U.S. same-store sales slipped 0.8% due to declines in the consumables and general merchandise category as well as in personal care, partially offset by “solid growth” in health and wellness as well as beauty.
The company’s international retail pharmacy comps dipped 0.9% on a constant currency basis. Its wholesale pharmaceutical segment comps rose 5.2%, ex currency.
“I am still positive on this deal,” Walgreens CEO Stefano Pessina told analysts in a conference call. “I believe we have a strong argument to defend this deal.”
Outlook: Full-year EPS still seen at $4.90-$5.08, below consensus views for $5.52.
In late March, Deutsche Bank warned a failed merger could result in Rite Aid shares getting slashed by more than half and Walgreens shares getting an up-to-14% whacking.
The New York Post reported Friday, citing unnamed sources, that Walgreens had set a deadline of about three months to obtain a decision from the Federal Trade Commission on the deal. The two companies had in January extended the end-date of their merger agreement to July 31.
Smaller drugstore chain Fred’s (FRED) reports on Thursday. Walgreens has promised to sell hundreds of Rite Aid stores to Fred’s as part of the agreement.
Rite Aid discloses earnings on April 25.