Walgreens chops forecast, misses 2Q earnings expectations

By The Associated Press

Walgreens slashed its 2019 forecast after falling short of expectations in what its CEO described as the most difficult quarter since the company was formed a few years ago.

The nation’s largest drugstore chain now expects adjusted earnings per share growth to be flat this year, compare to a previous forecast for growth of 7 percent to 12 percent that it had reaffirmed in late December.

Company shares tumbled below their 52-week low in early-morning trading Tuesday.

Walgreens Executive Vice Chairman and CEO Stefano Pessina said in a statement that challenges his company has been facing accelerated in the quarter, and they did not respond quickly enough, “resulting in a disappointing quarter that did not meet our expectations.” He noted that the company has been dealing with reimbursement pressure and lower generic drug prices, among other challenges.

“We are going to be more aggressive in our response to these rapidly shifting trends,” Pessina said.

Walgreens runs more than 18,500 stores in 11 countries and, along with CVS Health Corp., is one of the two biggest chains in the U.S. drugstore market.

Drugstores are facing pressure from several angles. Payers like insurers and pharmacy benefit managers are squeezing them to trim the cost of prescriptions, Edward Jones analyst John Boylan noted.

Declining prices for generic drugs and slower increases in the price of brand-name medicines have both made prescriptions less profitable.

Plus Walgreens Chief Financial Officer James Kehoe said in late February that his company has been “quite damaged” by rival CVS Health Corp.’s acquisition of Aetna, one of the nation’s largest insurers. He noted that Aetna transferred significant business to CVS pharmacies.