Walgreens Boots Alliance Tuesday warned that lower spending by inflation-weary consumers and a hit from a larger-than-expected drop in COVID-19 product sales would likely persist into next year, sending its shares down 9%.
The end of the COVID emergency in May led to a steep drop in COVID vaccines and testing, Walgreens executives said, while penny-pinching customers hunted for discounted items, shunning normal-priced consumer health products.
"Very few people are getting either rapid tests or the actual PCR nasal swab tests. That... probably has some impact on CVS and Rite Aid," said Gabelli Funds portfolio manager Jeff Jonas.
Walgreens' shares were at $28.64 in noon trade, hitting the lowest in more than 11 years after the company slashed its profit forecast for the year.
The forecast cut dragged shares of Rite Aid by nearly 12%, while shares of larger rival CVS Health were down 1.8%.
"Similar to other retailers, we've been impacted by the rapid softening of the macro environment and a more cautious and value-driven consumer," Walgreens CEO Rosalind Brewer told investors.
The company said on its conference call it now plans to close 300 additional locations in the United Kingdom and 150 in the U.S. It has around 13,000 locations across the U.S., Europe and Latin America.
Brewer said higher inflation rates, lower tax refunds and other macroeconomic issues were causing consumers to pull back on discretionary spending.
"I think there's some execution issues there, too. I still think they're learning how to target their promotions better and maximize their loyalty card," said Jonas.
Also weighing on shares, the pharmacy chain said its new healthcare business, through which it operates doctors' offices, missed Walgreens' target for sales growth due to a weak respiratory disease season.
The company said it had increased the target of an ongoing cost-cutting program to counter those pressures.
In the third quarter, Walgreens reported a 0.2% fall in same-store sales at its retail division, compared with estimates of a 2.1% rise, mainly due to lower COVID testing and sluggish demand for cough and cold medicines.
Same-store sales at its pharmacies, however, rose 9.8% and beat estimates of 8.8%, mainly due to higher drug prices.
The company now expects fiscal 2023 adjusted earnings per share of $4.00 to $4.05, from $4.45 to $4.65 previously.
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