Walgreens Boots Alliance reported a surprisingly poor fiscal 2019 second quarter, forcing executives to escalating a cost-cutting strategy amid pharmacy reimbursement pressure, particularly in the U.S.
Walgreens said it will work to create annual cost savings “from in excess of $1 billion to in excess of $1.5 billion by 2022,” the global drugstore chain said Tuesday in announcing earnings for its fiscal second quarter ended Feb. 28 of this year.
“The market challenges and macro trends we have been discussing for some time accelerated, resulting in the most difficult quarter we have had since the formation of Walgreens Boots Alliance,” Walgreens CEO and executive vice chairman Stefano Pessina said in a statement announcing earnings. “During the quarter, we saw significant reimbursement pressure, compounded by lower generic deflation, as well as continued consumer market challenges in the U.S. and UK. While we had begun initiatives to address these trends, our response was not rapid enough given market conditions, resulting in a disappointing quarter that did not meet our expectations.”
To be sure, second quarter earnings tumbled 14% to $1.2 billion and missed Wall Street analysts expectations. Revenue also missed analysts’ expectations at $34.53 billion.
Walgreens executives said they are quickly taking measures to improve the bottom line with plans to review store operations around the world and increase the companies focus on digital efforts and strategies.
“Our execution is lacking where it needs to be,” Walgreens co-chief operating officer Alex Gourlay told analysts on a 90-minute call to discuss fiscal 2019 second quarter earnings. “We will step up the level of innovation and market support.”
Walgreens has several partnerships in the works including one with Microsoft to “develop new health care delivery models, technology and retail innovations to advance and improve the future of health care.” The company also has a relationship with LabCorp to open hundreds of diagnostic test centers in Walgreens stores and a partnership with the grocer Kroger to expand food offerings in its drugstores.
Despite the new disclosure that another $500 billion will be trimmed from annual spending, Pessina said investments will continue to be made in the existing partnerships saying there was no plan to “starve the businesses.”
Date: April 04, 2019