Walgreens Boots Alliance Review : we study the quarterly results of the largest chain of pharmacies

Обзор Walgreens Boots Alliance: изучаем квартальные результаты крупнейшей сети аптек

Walgreens Boots Alliance (NASDAQ: WBA) is the world's largest network of pharmacies, which was formed at the end of 2014 through the merger of two firms: Walgreens и Alliance Boots. The company not only works offline, but also actively develops the online direction.

In early January, Walgreens Boots Alliance presented a report for the first quarter of 2022.. It's not about the calendar year., and about the financial, which the pharmacy retailer historically begins in October. Main quarterly results of the current period:

  • total revenue rose 7.8% to $33.901 billion, versus a market consensus forecast of $32.87 billion;
  • digital sales added year to year 88% due to the growth in the number of orders and the increase in myWalgreens customers - the number of users of the service in the current quarter amounted to 92.4 million people against 85.2 million people in the fourth quarter of 2021;
  • the average order value through walgreens Boots Alliance's online sales channels has increased since 20 to 30 $;
  • operating profit rose to $1.3 billion compared to a loss of $535 million in the first quarter of last year. The main reason is the strong operating results of all major segments;
  • net income per share increased from −0.45 to 4.13 $ at the expense of one-time income. Looking at the adjusted figure, then he grew up on 53% to 1,68 $, while analysts were expecting 1,34 $.

Let's take a closer look at the company's results.

Sales structure of the company

Segments of the company from the last walgreens Boots Alliance review have only slightly transformed after the deal with the leading wholesale supplier of pharmaceutical products AmerisourceBergen, under which the WBA sold most of its businesses to Alliance Healthcare, mainly engaged in wholesale trade of pharmaceutical goods. The deal amounted to 6.5 billion dollars.

The pharmacy chain divides its business into three segments.

Activities in the USA. The segment generates the most revenue and consists of operations in the local US market.

International direction. It includes subsidiaries from the UK, Germany, Chile, Mexico, Ireland, Thailand and other countries, as well as unsold assets of the Pharmaceutical Wholesale segment, the financial results of which after the transaction with AmerisourceBergen have decreased significantly.

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Walgreens Health. Digital medical activity of the pharmacy chain, consisting:

  • from MDLIVE — service, which allows you to consult with doctors online;
  • VillageMD is the leading primary care company in the U.S.;
  • Shields is an industry leader in integrated specialized assistance.

Moving on to the results of the first quarter, it is worth noting, that the largest contribution to the growth of financial indicators was made by the international segment, year-on-year sales increased by 36% from $4.285 billion to $5.818 billion against 7,8% in general, walgreens Boots Alliance. The main drivers are the recovery of the UK market and the creation of a new joint venture in Germany. For comparison: in the main local market, sales increased by only 3% against the backdrop of last year's high base.

Sales structure of the company, billion dollars

1к2021 1к2022 The change
American direction 27,163 28,032 3%
International direction 4,285 5,818 36%
Walgreens Health 0,051
Walgreens Boots Alliance Total Revenue 31,438 33,901 7,8%


Net profit of Walgreens Boots Alliance in the first quarter of 2022 increased from a negative value of 0.308 to 3.580 billion dollars on the background of a one-time income of $ 2.5 billion, which was recorded in the statements after the closing of transactions with VillageMD and Shields.

The company invested its own money in two data services, and in return received their shares: the current share of the pharmacy chain in VillageMD is equal to 63%, and in Shields — 71%.

Walgreens Boots Alliance also earned $1.1 billion in operating cash flow in the first quarter of 2022., which almost coincides with last year's result, but the company reduced its free cash flow by $118 million to $645 million.. The main reason for this is the reduction in working capital., increase in capital costs, as well as a decrease in state support, related to COVID-19.

Key financial results of the company, billion dollars

1к2021 1к2022 The change
Revenue 31,438 33,901 7,8%
EBITDA 0,035 1,783 5100%
EBITDA margin 0% 5% 5 P. P.
Net profit −0,308 3,580
FCF 0,763 0,645 −15%
net debt 15,107 9,711 −36%

Management forecasts

After the publication of strong financial results for the first quarter of 2022, the management of Walgreens Boots Alliance increased its own forecast for the whole of 2022. Main points:

  1. Management is counting, that in 2022, adjusted net earnings per share will grow at a single-digit rate from 3 to 5%. Considering, that in 2021 this value was equal to 4,91 $, then this year it should increase to 5.06-5.16 $.
  2. Revenue in 2022 will be 130.2-130.6 billion dollars against the background of weak results of the American segment due to short-term problems, related to the loss of AllianceRx specialized business contracts, and strong performance of the European division, which will grow by 9-11%. Walgreens Health's contribution to the overall result will be at the level of 2% and will amount to 2.6 billion dollars.
  3. The adjusted tax rate in 2022 will be at the level of 16%.
  4. By the end of fiscal 2022, the number of VillageMD branches in Walgreens Boots Alliance pharmacies will almost double - from 81 up to at least 160 branches.
  5. The company will continue to invest in Walgreens Health - by the third quarter of 2022, management plans to close the deal with the digital service CareCentrix, under which it will be purchased 55% stake for $550 million.
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In addition to this prediction, Walgreens Boots Alliance also announced, that through its Transformational Cost Management Program, management hopes to save an additional $3.3 billion by 2024 compared to 2018 data.. At the end of 2021, the company reached the figure of $ 2 billion.

Comparison with competitors

The largest pharmacy chain is now busy restructuring its own business, because of what the company can not afford to spend significant funds on a buyback, to which many investors are accustomed. Walgreens Boots Alliance bought about 1 million of its shares over the past year, while four years earlier - from 2016 to 2020 - the company acquired about 218 million securities.

This led to the fact that, what is the dynamics of shares of a pharmacy retailer over the past 12 months were worse than the S index&P 500.

Обзор Walgreens Boots Alliance: изучаем квартальные результаты крупнейшей сети аптек

Comparison with competitors

EV / EBITDA P / E net debt / EBITDA
Walgreens Boots Alliance 9,27 7,23 1,60
CVS Health 10,32 18,15 2,69
Rite Aid 8,49 −4,32 6,84
Walmart 11,68 50,11 0,62
Target 10,26 16,30 0,61

What's the bottom line?

Walgreens Boots Alliance delivered strong financial results in the first quarter of 2022:

  • revenue increased by 8%;
  • adjusted net profit increased by 53%;
  • net debt decreased by 36%.

All this made a weak impression on the market - as part of the first reaction. 6 In January, shares fell by almost 3%, and already 7 In January, quotes returned to their previous positions.

The further long-term movement of shares will largely be correlated with the current transformation of the Walgreens Boots Alliance business., within the framework of which the pharmacy chain is trying to occupy the most promising segments of the digital medical market, buying large stakes in small industry companies, for example VillageMD, Shields and CareCentrix. If the retailer manages to reorganize, then, probably, its own EV score / EBITDA ~ 9 won't stay long.

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