Walgreens Pins Forecast on Vaccine in Unpredictable Pandemic

(Bloomberg) -- Walgreens Boots Alliance Inc. anticipates fewer stay-at-home orders and an eventual Covid-19 vaccine to boost its performance over the next fiscal year.

The drugstore giant has already seen the benefits of loosening restrictions, Chief Executive Officer Stefano Pessina said Thursday on a call with analysts. Walgreens beat Wall Street’s fourth-quarter estimates, though its earnings in the period were lower than a year earlier, and forecast low single-digit growth for the coming fiscal year.

Planning poses a major challenge for Walgreens and other companies in the midst of a pandemic and an uneven recovery. This week, major clinical trials of vaccines and antibody therapies were paused in the U.S., and there are signs that a resurgent virus could force the return of travel curbs and other restrictions. London and other European cities are already clamping down as cases spread across the continent.

Walgreens’ guidance assumes that a Covid-19 vaccine will become available and the strict lockdowns from last spring won’t return, Chief Financial Officer James Kehoe said on a call with analysts.

In the U.S., Walgreens anticipates more localized lockdowns than blanket restrictions.

“Our way of looking at this is the risk of large-scale lockdowns has a lower probability, but it’s a larger number,” Kehoe said. “And then the likely upside coming from vaccinations is medium-to-high probability but it’s a lower number.”

Walgreens shares gained as much as 6.4% in morning trading in New York on Thursday. Through Wednesday’s close, the stock had fallen 39% this year.

Sales Rebound

Sales rebounded in the fourth quarter, though international revenue still lagged and the number of prescriptions filled in the U.S. remained below pre-pandemic levels. Foot traffic in large U.S. cities like New York and Chicago is down 39%, while rural areas are posting better results, Kehoe said.

Walgreens plans to close about 250 stores in the U.S., the company said. It had previously planned to shutter 200. It has already closed 215 locations.

Some elements of Walgreens’ business may change forever, Pessina said, though the company’s positioning remains strong.

“We are confident we will come out of this in better shape as an organization,” he said.

Pessina said in July he would step down as CEO. On Thursday he said the board’s search for his successor is underway and that the company’s performance illustrates the transition won’t interrupt Walgreens’ progress.

Adjusted earnings per share declined 28% from a year earlier to $1.02, though that was better than the 96 cents a share expected by Wall Street analysts.

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