Investors have gotten a bit skittish over the past week or so, pressing the pause button on a rally that has sent some major market benchmarks sharply higher so far in 2023. Before the market opened on Tuesday, Wall Street appeared likely to see a mixed open, with gains in tech-related stocks but pressure on other parts of the market.
One stock that weighed on the Dow Jones Industrial Average (^DJI 0.40%) is Walgreens Boots Alliance (WBA 0.57%), which announced quarterly financial results that left shareholders wanting more. However, even bigger declines came from electric vehicle (EV) company Lordstown Motors, which filed for bankruptcy protection. You'll find more highlights on both companies below.
Weaker consumers drag Walgreens down
Shares of Walgreens Boots Alliance were down more than 8% in premarket trading on Tuesday morning. The move lower threatened to send the drugstore chain's stock to its worst levels in over a decade.
Walgreens' fiscal third-quarter financial report was to blame, as the numbers from the period ended May 31 showed some of the challenges the retail industry has faced more broadly. Revenue held up fairly well, rising 8.6% year over year to $35.4 billion. However, net income fell 59% to $118 million as impairments in the Boots UK business hit the bottom line. Even after accounting for that and other extraordinary items, adjusted earnings of $1 per share were up just 3.6% from year-ago levels, as steep declines in COVID-19-related purchases offset growth elsewhere.
Nevertheless, Walgreens stayed on track with the four strategic priorities it has identified. The company is looking to cut costs by $4.1 billion by fiscal 2024 while building out its healthcare solutions portfolio with more care options for customers. Making better capital allocation decisions and building up its corporate culture are also key elements of Walgreens' future success.
What investors seemed to focus on, though, was Walgreens' move to cut its earnings guidance for the rest of the fiscal year. The drugstore retailer now expects to see profit of $4 to $4.05 per share on an adjusted basis, down $0.45 to $0.60 from its previous guidance range. That's considerably below where most of those following the stock expected its annual profit to be, and it points to uncertainty in consumer spending more broadly.
Lordstown's ride comes to an end
Shares of Lordstown Motors were down 60% in premarket trading, sending the EV automaker's shares toward penny-stock territory. The company resorted to filing for bankruptcy protection amid controversy relating to its relationship with contract manufacturer Foxconn.
Lordstown's announcement included harsh language about Foxconn's behavior, as CEO Ed Hightower said that "Foxconn willfully and repeatedly failed to execute on the agreed-upon strategy" in their EV development partnership. Hightower promised vigorous litigation against Foxconn, which began with lawsuits against the supplier and related entities.
In the meantime, bankruptcy protection will allow Lordstown to start a comprehensive marketing and sale process for the Endurance electric pickup and related assets. The goal is to provide a prospective buyer an opportunity to purchase a going concern that can move forward independently, leaving the bankrupt business entity to fight it out with Foxconn.
With so many electric vehicle manufacturers vying for position, it's inevitable that many of them will eventually fail. Lordstown's trucks could still eventually enter full production at some point in the future, but its current shareholders might well lose everything, and EV investors more broadly need to understand the risks involved in the space.
