Walgreens Boots Alliance Inc. (NASDAQ:WBA) is poised to report its quarterly financial results after coming under immense pressure in 2020. The stock capitulated as the COVID-19 pandemic took a toll on the company’s core business as depicted by a decline in same-store sales and contraction in gross margin. The stock was down by more than 30% having struggled to bounce back.
Risk Factors
The company’s sentiments took a hit in the wake of Amazon.com, Inc. (NASDAQ: AMZN) making inroads in the drug’s distribution business. The e-commerce giant possesses the biggest pricing risk expected to challenge Walgreen's volumes going forward. Likewise, margins should remain challenged In addition to the competition threat posed by the e-commerce giant. Walgreen's push into the beauty products business is yet to reap the expected returns.
Coming at the back of a challenging quarter, owing to COVID-19 disruptions that affected store sales, Walgreens operations took a hit on lockdown measures in Europe. In addition, changes to utilization patterns is believed to have affected demand for flu vaccines as well as demand for cough cold and flu products.
Wall Street expects Walgreens to report a year-over-year decline in earnings. However, revenues are expected much higher. Analysts expect the large drugstore to report quarterly earnings of $1.02 a share representing a 25% year over year decline. Revenue on the other hand is expected at $34.93 billion up 1.7% for the same quarter the previous year.
Walgreens Outlook
Looking ahead, Walgreens could be one of the biggest beneficiaries to the COVID-19 vaccination drive. The vaccination drive could result in an incredible amount of traffic to the company’s locations thus allow the company to latch onto more customers. The CDC has already partnered with the company to offer COVID-19 vaccines in nursing homes.
In addition to the COVID-19 opportunity, Walgreens has also embarked on an ambitious drive to trim its expenditure. The drugstore is planning to cut at least $2 billion in annual spending by 2022. The cut should accord the company with the much-needed capital to enhance its digitization drive. Digitization is crucial if Walgreens is to remain the preferred drugstore chain amid the threat posed by Amazon.