Walgreens Boots Alliance, Inc. (NASDAQ: WBA) experienced a significant drop of more than 7% in pre-market trading on Tuesday. The decline came after the company released its soft third-quarter (Q3) results and revised guidance, which left investors disappointed.
During Q3, Walgreens reported earnings per share (EPS) of $1.00, missing the analyst estimate of $1.08. The revenue for the quarter was $35.4 billion, slightly surpassing the consensus estimate of $34.24 billion. However, the adjusted gross margin came in at 18.8%, falling short of the consensus of 20.4%.
Rosalind Brewer, the chief executive officer, attributed the margin pressures to several factors, including significantly lower demand for COVID-related services, a more cautious and value-driven consumer, and a weaker respiratory season.
“Significantly lower demand for COVID-related services, a more cautious and value-driven consumer, and a recently weaker respiratory season created margin pressures in the quarter,” said chief executive officer Rosalind Brewer.
Consequently, the company has revised its full-year forecast. The new guidance expects EPS of $4.00-4.05, down from the previous estimate of $4.45-4.65. This adjustment takes into account consumer and category conditions, lower COVID-19 contribution, and a more cautious macroeconomic outlook.
Analysts had anticipated full-year EPS of $4.46, further underscoring the disappointment among investors. Despite the downward revision, Brewer highlighted that the revised guidance reflects a cautious outlook while showing clear indicators for a return to operating growth in the next fiscal year.
“Our revised guidance takes an appropriately cautious forward view in light of consumer spending uncertainty, while still demonstrating clear drivers of a return to operating growth next fiscal year,” Brewer added.
Walgreens Boots Alliance shares have already experienced a 16% decline year-to-date, as observed from Monday’s closing.