What happened

After reporting fiscal first-quarter 2018 results and updating its progress in integrating its acquisition of more than 1,900 Rite Aid (NYSE:RAD) stores, shares in Walgreens Boots Alliance (NASDAQ:WBA) are losing 5.9% of their value at 11:45 pm EST.

So what

There were a number of one-time items that negatively impacted Walgreens Boots Alliance's GAAP-results in its fiscal first quarter. For example, an impairment associated with its equity method investment in Guangzhou Pharmaceuticals Corporation was the primary reason why GAAP diluted net earnings per share declined 16.5% to $0.81 from one year ago. GAAP operating profit was also reduced by recording a loss tied to its share of AmerisourceBergen's litigation accrual, which was announced by AmerisourceBergen last quarter. GAAP operating income in the first quarter was $1.3 billion, down 8.6% year over year.  

A senior woman shopping in the health and beauty aisle of a pharmacy store.

Image source: Getty Images.

Ex-out the one-time items, however, and Walgreens Boots Alliance's results appear much better. On an adjusted basis, diluted net earnings per share were $1.28, up 16.4% from last year, and operating income was $1.8 billion, up 4.8% from last year.

Walgreens Boots Alliance's top-line performance also appears solid. Same-store sales for its retail pharmacy USA segment increased 4.7% from a year ago and total first-quarter sales grew 8.9% to $22.5 billion in the segment. The increase was supported by a 14.1% increase in pharmacy sales, which accounted for 72.4% of the division's quarterly sales. The growth was due primarily to higher prescription volumes, which resulted in comparable pharmacy sales increasing 7.4%. The volume growth helped increase the company's U.S. pharmacy market share by 1.1% over the past year to 20.6% according to IMS Health. 

Offsetting the pharmacy growth, however, was a downturn in front-of-store revenue. Retail sales fell 2.8% in the first quarter compared with the year-ago period due to declines in consumables and general merchandise sales.

Now what

Management will be busy over the next year converting stores it acquired from Rite Aid. So far, Walgreens Boots Alliance has taken ownership of 357 of the 1,932 stores its acquiring and management says it's on track to have taken ownership of the remaining stores this spring. As a refresher, Walgreens Boots Alliance is paying Rite Aid $4.375 billion in cash for those stores and it expects $750 million in associated integration costs. Over time, the acquisition could produce $300 million in annual cost-saving synergies for Walgreens Boots Alliance.

As for guidance, Walgreens Boots Alliance did increase the low end of its fiscal full-year earnings per share outlook by $0.05 to $5.45 to $5.70. 


Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.