(Bloomberg) — Walgreens Boots Alliance Inc. (Nasdaq:WBA) beat analysts’ earnings estimates of fiscal first-quarter earnings estimates, as strong prescription drug trends made up for a retail slump that continues to plague the company.
Walgreens has been renovating stores to try and draw in shoppers with a better experience and more high-end products. In the U.S., the drugstore chain’s biggest market, same-store retail shrank fell 0.6 percent in the fiscal first quarter compared with a year before, Walgreens said in a statement Thursday. It’s a lackluster figure that hasn’t kept up with gains in the company’s prescription drug dispensing business.
The Walgreens fiscal year started Sept. 1, and its first quarter ended Nov. 30.
Earnings, excluding one-time items, were $1.03 a share, compared with the 96 cents average of analysts’ estimates.
- U.S. drugstore sales were $20.4 billion, up 4.2 percent from a year ago.
- U.S. same-store sales rose 5.8 percent, with pharmacy sales gaining 9.3 percent and retail declining 0.6 percent, Walgreens said, “primarily due to a reduction in unprofitable promotions and the transitioning of seasonal items away from holiday decorations and toward higher quality, giftable items.”
- The company’s U.S. pharmacies filled 231 million prescriptions in the quarter, up 4.1 percent from a year ago.
- Total sales were $29.0 billion, up 48 percent from a year before thanks to the merger of Walgreen Co. and Alliance Boots GmbH in Dec. 2014.
- The company raised the low end of its earnings guidance for fiscal year 2016 by 5 cents, to $4.30 to $4.55 per adjusted share.
Walgreens shares rose in early trading Thursday, up less than 1 percent to $79.75 before the market opened in New York. U.S. stock futures indicated that stocks would open down on Thursday, after a drop in Chinese and European markets.
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“We view today’s EPS beat as notable and expect shares to react favorably, at least relative to the market,” Ross Muken, an analyst with Evercore ISI, said in a note to clients. The soft retail sales were “a function of a transition of the business and a shift away from unprofitable sales.”