Profits up at Walgreens as Rite Aid merger is delayed

Walgreens Boots Alliance chain posts earnings of $1bn in Q4 2016

Walgreens Boots Alliance has beaten profit estimates in the fourth quarter of 2016, helped by a cost-cutting scheme announced last year.

The company posted total net earnings of $1bn in the three months to 31 August, boosted by a 2.5% increase in sales overall reaching $28.6bn.

Stefano Pessina, Executive Chairman and CEO, said that the company was making “good progress”. He said: “We have continued to make good progress in putting place the building blocks for the future growth of the business.”

We have continued to make good progress in putting place the building blocks for the future growth of the business.”
Stefano Pessina, Executive Chairman and CEO

In retail sales, Walgreens reported a decline of 0.5% in its US business and 1% in its international business – the latter due to weaker performance in the UK.

In the US, however, while comparable retail sales were down 0.3%, primarily due to lower sales of certain consumables and seasonal items, this was partially offset by higher sales in the health and wellness and beauty categories.

Walgreens is refreshing its beauty offering in US stores. The company says the first phase of its “new, differentiated beauty offering” is now complete, reaching 1,600 stores.

The company is still on track to cut costs by $1.5bn by the end of 2017.

Last year, Boots announced a series of cost-cutting measures that included reducing the number of managerial roles and head office staff.

In June, as previously announced, Walgreens achieved its goal set in 2012 to reach at least $1bn in combined net synergies in fiscal 2016, relating to the merger with Alliance Boots.

The company has pushed back the estimated completion of its acquisition of rival drugstore chain Rite Aid.

The deal is now expected to complete in January 2017, three months later than initially planned. Walgreens agreed to buy Rite Aid for $17.2bn in October 2015.

Walgreens expects that the Federal Trade Commission will require it to divest 500-1,000 stores as part of the merger, with these stores sold before the end of the calendar year.

Overall, however, Walgreens said that the acquisition was “progressing as planned”.

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