Walgreens Boots Alliance has said that it will not strike new deals in the short term following a spate of acquisitions in recent years, as it focuses on ramping up sales at its newer healthcare business.
The firm has been looking to gain a bigger foothold in the healthcare space at a time when sales at its traditional brick-and-mortar stores are hit by lower demand for COVID-19 vaccines and testing compared to last-year's peak.
"We're not considering any M&A type activity in the short term. We're taking a pause. We need to focus on integration activities," chief financial officer James Kehoe said in a post-earnings conference call.
The company could still make targeted acquisitions, but those would likely be in the hundreds of millions of dollars range, Kehoe said.
Shares of the company fell over 6% after same-store sales at its pharmacy business missed expectations in the first quarter.
Recent Investments
Walgreens spent $5.5 billion (€5.23 billion) in 2021 to take majority stakes in healthcare providers VillageMD and CareCentrix, and VillageMD later struck a $9 billion deal to buy urgent care provider Summit Health in November 2022.
Pharmacy sales during the quarter dropped about 4% even amid high demand for cough and cold drugs during one of the worst U.S. flu seasons in a decade.
The operator of the Walgreens and Boots businesses said same-store pharmacy sales rose 4.8% in the reported quarter from a year earlier, but below Evercore ISI's estimates of 5% growth.
Comparisons from last year when there was a COVID surge are "masking some positive changes we are seeing with Walgreens building its U.S. Healthcare business and improvements the company has made in its drugstores post-pandemic," Edward Jones analyst John Boylan said.
Net loss attributable to Walgreens was $3.72 billion (€3.54 billion), for the quarter ended Nov. 30, compared with a profit of $3.58 billion (€3.41 billion) a year earlier.
Analyst Viewpoint
Commenting on the performance of its Boots arm in the UK, Zoe Mills, lead retail analyst at GlobalData, said, “Boots is entering its new financial year in a good position, with the health & beauty specialist reporting that UK total sales were up 4.3% for the first quarter ending 3 November 2022, bolstered by its retail division (+8.7%) that witnessed a positive Black Friday at the end of the period that was driven by an impressive online performance.
"The popular promotional event enticed shoppers to spend on premium beauty brands and big-ticket items such as personal care electricals.
"Amid a highly competitive landscape, as consumers cut back on non-essential goods and trade down to value retailers, Boots’ focus on price has been key to its performance in 2022, with its own-brand Everyday essentials range up 35% in Q1."
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