Walgreens Warns of Virus Disruptions Amid Vaccine Rollout

(Bloomberg) -- Walgreens Boots Alliance Inc. said its drugstores are withstanding the coronavirus pandemic, though it warned of possible hurdles ahead with renewed lockdowns and surging virus cases.

The company may face “short-term disruption from continued and new restrictions and lockdowns as communities continue to struggle to contain the spread of the virus while vaccination programs take place,” Chief Executive Officer Stefano Pessina said on a call with analysts.

The CEO spoke after the pharmacy giant reported earnings that beat analysts’ expectations and reaffirmed it guidance for the 2021 fiscal year. Gains from its involvement in administering Covid-19 vaccines in the U.S. will likely be offset by pandemic lockdowns and other costs, the company said.

Chief Financial Officer James Kehoe called potential lockdowns “a cloud in the future.” He and Pessina said the company is better at managing restrictions than last spring thanks to boosting its online shopping and delivery offerings.

The shares gained as much as 5.8% in New York. They had lost 28% over the past 12 months through Wednesday.

Accelerating Immunizations

In the U.S., the drugstore chain is administering Covid-19 vaccines in more than 35,000 nursing homes and other long-term care facilities through a partnership with the government. The company will also give Covid-19 shots at its stores in the next phases of the vaccination campaign.

Officials from the incoming Biden administration have signaled vaccinations will accelerate in the spring, said Alex Gourlay, Walgreens’ co-chief operating officer. Walgreens is in close contact with Biden’s team and Operation Warp Speed, the federal initiative overseeing vaccine development and distribution, Gourlay said.

Exactly how much Walgreens stands to gain and when remains a moving target. The company doesn’t have great visibility into the availability of vaccines, Kehoe said.

“There’s a large amount of uncertainty,” he said. “However, with pieces of the puzzle we know, we believe we have opportunity in the second part of the year.”

Fiscal first-quarter adjusted earnings were $1.22 a share, Walgreens said Thursday, compared with the $1.03 average estimate of Wall Street analysts. Revenue rose 5.7% to $36.3 billion, compared with the average estimate of $34.9 billion. The company affirmed its guidance of low single-digit growth in fiscal 2021 adjusted earnings per share.

Weakened Flu Sales

Walgreens faces weak sales of cough, cold and flu medications with coronavirus restrictions keeping seasonal illnesses at bay, executives said. People avoiding doctor’s offices amid the pandemic continues to weigh on new prescriptions, they said.

The company said Wednesday that it would sell its Alliance Healthcare businesses to AmerisourceBergen Corp. for about $6.5 billion. Divesting the drug distribution unit will allow Walgreens to invest more in its core retail pharmacy business, Pessina said.

Walgreens has already used a portion of proceeds from the deal to accelerate its investment in primary-care provider VillageMD. It aims to install doctor’s offices in as many as 700 U.S. stores over the next four years.

The company is searching for a successor for Pessina, who announced last summer he would step down as chief executive and move into the executive chairman role. Pessina said Thursday that he hopes to announce his replacement soon.

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