Walgreens Boots Alliance Inc. (NASDAQ: WBA) reported a 25% drop in earnings for the first quarter of 2020 due to higher charges related to the acquisition of Rite Aid stores and the implementation of its transformational cost management program. The results missed analysts’ expectations.

Net earnings fell by 25% to $845 million or $0.95 per share. Adjusted earnings were $1.37 per share, down 6% on a reported basis and 5.7% on a constant currency basis from last year. Sales increased by 1.6% to $34.3 billion. On a constant currency basis, sales rose by 2.3%.

Walgreens Boots Alliance Q1 2020 Earnings Review

Looking ahead into fiscal 2020, the company still expects roughly flat growth in adjusted earnings per share at constant currency rates, with a range of plus or minus 3%.

Retail Pharmacy USA had sales growth of 1.6% as comparable-store sales increased by the same percentage. Pharmacy sales grew by 2.9% reflecting higher brand inflation and prescription volume, as well as strong growth in the central specialty. Comparable pharmacy sales increased by 2.5% and prescriptions filled in comparable stores increased by 2.8%.

Retail sales declined by 2.2%. Comparable retail sales were down 0.5% in the quarter, mostly due to continued de-emphasis of tobacco. Excluding tobacco and e-cigarettes, comparable retail sales increased around 0.8%, reflecting solid growth in the core health and wellness and beauty categories.

Retail Pharmacy International dropped by 5.4% reflecting an adverse currency impact of 2.7%. Sales decreased 2.7% on a constant currency basis, mainly due to lower retail sales in Boots UK and lower sales in Chile, reflecting social unrest.

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In Retail Pharmacy International, comparable pharmacy sales rose 0.6% on a constant currency basis, primarily due to the UK, driven by higher National Health Service (NHS) reimbursement and increased sales of services. Comparable retail sales declined by 3% on a constant currency basis, with Boots UK holding a share in a declining market.

Pharmaceutical Wholesale had first-quarter sales growth of 5.2% from the year-ago quarter, including an adverse currency impact of 3%. On a constant currency basis, comparable sales increased 8.3%, led by emerging markets and the UK, including a customer contract change in the UK.

The company remained on track to deliver in excess of $1.8 billion in annual cost savings by fiscal 2022 under the transformational cost management program. The company and McKesson agreed to create a German joint venture, combining their wholesale operations to drive long term value in a key European market. Walgreens and Kroger expanded their collaboration with a new joint venture aimed at delivering cost savings and other benefits across owned brand sourcing.

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