Walgreens Boots Delivers Solid Q3

Walgreens Boots Alliance delivered an overall solid third quarter as the company makes progress in finalizing its acquisition of Rite Aid.

For the third quarter ended May 31, Walgreens Boots Alliance posted company net earnings of $1.1 billion, or $1.01 per diluted share, versus $1.3 billion, or $1.18 per diluted share, in the period a year prior.

The company reported that adjusted net earnings attributable to Walgreens Boots Alliance increased 14.7% to $1.3 billion, while adjusted earnings per diluted share increased 15.7% to $1.18. Walgreens beat an analyst average estimate published by MarketBeat, which called for $1.14 in adjusted diluted earnings per share.

Net sales were $29.5 billion versus $28.8 billion in the 2015 quarter.

The retail pharmacy USA division posted total sales of $21.2 billion, up 3.7% over the year-earlier quarter, with comparable store sales gaining 3.9% versus the quarter a year previous. Retail comps, which exclude pharmacy revenues, increased 0.1% in the third quarter versus the year-earlier period, primarily due to higher sales in the health and wellness, and photo categories, partially offset by declines in convenience categories. To boost sales and profits, the division is launching an updated beauty offering that should available in its stores by the end of this calendar year, Walgreens Boots said.

The division GAAP operating income advanced 13.2% in the quarter to $1.2 billion, while adjusted operating income increased 4.1% versus the period a year before to $1.4 billion.

 “We delivered solid results in the quarter while continuing to make progress in several key areas, including our work to develop long-term strategic relationships and pursue partnership opportunities," said Stefano Pessina, executive vice chairman and CEO, Walgreens Boots Alliance. "I’m pleased to report that, since the quarter end, we achieved our goal set four years ago of at least $1 billion in combined net synergies in fiscal year 2016 related to the strategic combination with Alliance Boots. This provides us with a strong platform to further enhance operating performance, to meet the challenges of the current volatility in many of our markets and to better position our company for long-term success.”

According to Walgreens Boots, its proposed acquisition of Rite Aid Corp. is progressing, and on June 1, it completed a public offering of $6 billion aggregate principal amount of unsecured, unsubordinated notes with varying maturities and interest rates. The offering's net proceeds will fund a portion of the cash consideration payable in connection with the pending acquisition, to retire a portion of Rite Aid’s existing debt and to pay related fees and expenses. Walgreens Boots stated that it expects the Rite Aid transaction to close in the second half of calendar 2016.

Walgreens Boots Alliance operates over 13,100 stores in 11 countries.