Walgreens Banks Historic Sales Record Thanks To Covid Vaccines and Tests

Scarcity and fear are proving to be very good for the drug store business. JL 

Sharon Terlep and Will Feuer report in the Wall Street Journal:

Walgreens rode the latest Covid-19 surge to its highest retail sales increase in 20 years. Demand for at-home Covid-19 tests helped drive a 24.7% increase in health and wellness sales. Walgreens administered 15.6 million Covid-19 vaccinations in the latest quarter, which ended Nov. 30, and provided 6.5 million Covid-19 tests, including over-the-counter at-home tests. The chain said it now expects to administer 30 million vaccines this year. The company posted net income of $3.6 billion for the quarter, compared with a loss of $308 million in the year-ago quarter. Walgreens Boots Alliance Inc. WBA +2.76% rode the latest Covid-19 surge to its highest retail sales increase in 20 years, but Americans’ scramble for vaccines and tests has overwhelmed workers and dented growth in prescriptions. 

The Deerfield, Ill., drugstore chain said sales and profits rose in its latest quarter, and raised its full-year forecast as demand for Covid-19 vaccines and at-home tests continued to draw customers to its stores. 

Walgreens said it administered 15.6 million Covid-19 vaccinations in the latest quarter, which ended Nov. 30, and provided 6.5 million Covid-19 tests, including over-the-counter at-home tests. The chain said it now expects to administer 30 million vaccines this year, up from 25 million, as booster shots get approved for more groups.

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Covid-19-related demand took a toll on other parts of the business, Walgreens said. Prescription sales, not including vaccines, grew 1.8%, as staffing shortages prompted some stores to close early and prevented pharmacists from calling patients to ensure they are keeping up on their medications.

“We’ve got to get a bit of a rebalance in the year,” Walgreens Finance Chief James Kehoe said.

Demand for Covid-19 tests, especially at-home kits, has significantly outstripped supply as the fast-spreading Omicron variant leads more people to seek diagnostic tools. The Biden administration has promised to deliver 500 million at-home tests at no charge starting in the coming weeks, and many state and local governments have reopened mass testing sites that were plentiful in the pandemic’s earlier days.

Mr. Kehoe the company has “superbly executed” its supply-chain strategy around at-home tests. He said Walgreens has a 40% to 45% share of the U.S. at-home test sales, more than double its share of the overall health and wellness market. Still, the company said, availability is spotty and roughly 30% of stores don’t have any in stock. Remaining locations have at least one test in store.

Walgreens and rival CVS Health Corp. have been charging $23.99 for a pair of Abbott Laboratories ’ BinaxNow rapid tests, among the cheapest and most popular at-home Covid-19 kits. Until recently, Amazon.com Inc., Walmart Inc. and Kroger Co. were selling the BinaxNow kits at cost for $14 as part of a deal with the White House. Mr. Kehoe said Covid-19 testing is “not a massively profitable sector.”

The White House said this week that it expects to begin receiving test kits in the next week and that Americans will begin receiving them in the coming weeks. The administration says it plans to set up a website to distribute the tests.

Walgreens’ Mr. Kehoe, asked on a call with analysts how that plan will affect sales, said he believes the free kits likely won’t be available for months. “As far as I know, there isn’t a website set up and there isn’t a defined procedure of how it’s all going to work so I think it’s still a couple of months away.”

Demand for at-home Covid-19 tests helped drive a 24.7% increase in health and wellness sales. Overall comparable retail sales increased 10.6% compared with the year-ago period, the most in two decades. Prescriptions filled rose by 6.2% in the latest quarter on a comparable basis, the majority of which was from vaccinations. Excluding vaccinations, the increase was 1.8%.

Overall, Walgreens posted sales of $33.90 billion for the fiscal first quarter, up from $31.44 billion in the same period last year.

Walgreens also said it is increasing its full-year adjusted earnings guidance from flat to low-single digit growth, reflecting its first-quarter performance.

Shares were down about 1% Thursday morning. The stock rose about 30% in the last year.

The company noted that its full-year earnings will be affected by incremental investments in its employees. Frontline workers, especially pharmacy technicians, at Walgreens and its rivals have been rocked by the demands of keeping up with the Covid-19 vaccination campaign.

The company has said it is working to improve conditions by adding prescheduled breaks, hiring more staff and raising pay. On Thursday, the company said it is spending $120 million this year to address staffing issues.

The company posted net income of $3.6 billion for the quarter, compared with a loss of $308 million in the year-ago quarter. On an adjusted basis, the company reported earnings of $1.68 a share.