Shares of Walgreens Boots Alliance (WBA -0.98%) were down 13.5% in the month of June, according to data from S&P Global Market Intelligence, after it announced it wouldn't be selling its Boots and No7 Beauty businesses.
The pharmacy chain also reported earnings at the end of the month that were ahead of expectations but that underwhelmed Wall Street because of headwinds in the quarters ahead.
Walgreens sought to shed the U.K. pharmacy chain Boots and the personal and beauty care products company No7 Beauty because it wanted to focus more directly on its U.S. healthcare operations.
Although Walgreens had received significant interest in Boots from Apollo Global and Indian conglomerate Reliance Industries, they were unable to raise sufficient financing from banks who feared underwriting the deal with the current economic uncertainty.
Because of a potential recession looming on the horizon as central banks begin aggressively raising interest rates to gain control over rampant inflation, it would be more difficult to access financing, and costlier to do so, meaning the $10.9 billion valuation Boots had on it was too high.
Boots operates some 2,200 stores in the U.K., including pharmacies and healthcare and beauty stores.
Walgreens launched No7 Beauty in April 2019 as a consumer-oriented, largely sustainably sourced beauty and personal care products line.
Although Walgreens will retain both Boots and No7 Beauty, it's not as though they're broken businesses. In fact, the pharmacy chain maintains they are quite strong. Boots in particular saw comparable retail sales jump 24% last quarter, and though pharmacy comps were down 0.4%, that was because they were going up against a one-time reimbursement from the U.K.'s National Health Service.
While Walgreens is not selling the businesses now, it could very well sell them in the future when global economic concerns recede. In the meantime, it will still be able to concentrate on its U.S. healthcare business.
Walgreens earnings showed a solid business growing amid the turmoil. Fiscal third-quarter revenue of $32.6 billion exceeded analyst forecasts of $32.1 billion, and profits of $0.96 per share were ahead of $0.92-per-share expectations.
The healthcare stock had been up and down all month long before tumbling on the strategic review news. Shares are now down 26% in 2022.