What happened
Shares of Walgreens Boots Alliance (WBA +0.00%) were sinking 6% lower as of 11:27 a.m. EST on Wednesday. The decline came after the pharmacy retailer and wholesaler announced disappointing fiscal year 2020 first-quarter results before the market opened.
Walgreens reported Q1 revenue of $34.3 billion, up 1.6% year over year. The consensus analysts' estimate projected that the company would generate revenue of $34.6 billion. Adjusted earnings per share were $1.37, down 6% year over year and below the average analysts' estimate of $1.41.
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So what
One disappointing quarter isn't all that important in the big scheme of things. But Walgreens' Q1 performance underscores the continued challenges for the company.
It especially faces headwinds with its international retail pharmacy business. Sales fell for its Boots UK business. Unrest in Chile also weighed on Q1 results. The company's biggest segment, retail pharmacy USA, continues to experience the negative financial impact of Walgreens' decision to de-emphasize sales of tobacco products.
But its U.S. retail business is growing overall, as is its pharmaceutical wholesale business. And while CEO Stefano Pessina acknowledged that it was "a soft first quarter," he said that the company remains "confident our strategic plans are the right ones to drive long-term sustainable growth going forward."
Now what
Despite the weaker-than-expected Q1 results, Walgreens didn't lower its full-year fiscal 2020 outlook. The company still expects roughly flat growth in adjusted EPS on a constant-currency basis.
Investors will want to watch how two new partnerships for Walgreens unfold. The company is forming a wholesale joint venture in Germany with McKesson; and it has created a group purchasing organization with Kroger.
Even with these initiatives, Walgreens doesn't appear on track to deliver much growth in the foreseeable future. It remains a reasonably solid dividend stock, though, with a yield of 3.1% and a track record of 44 consecutive years of dividend increases.
