WBA - Earnings call transcript Q1 2019 | Walgreens Boots Alliance, Inc.

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Operator

Good day, ladies and gentlemen and welcome to the Walgreens Boots Alliance, Inc.

First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. to host like Mr. today’s now would introduce for your conference, I Gradwell, Investor of Vice and Gerald President Relations Senior Special Projects. begin. Sir, may you

Gerald Gradwell

of Good Alliance Alliance; here Alex Officer and earnings gentlemen and Officer; Chief Walgreens. our morning, and our of Chairman and our ladies quarter Walgreens of Global Officer first Financial Boots Executive welcome Vice Operating call. Kehoe, with Walgreens Gourlay, today to am President Co-Chief Executive Boots Stefano James Pessina, I and Chief

will and financial the website any we discussion for they GAAP statements. presentation, latest a XX-K to information, a certain appendix presentation, reconciliations and of risks new see available you the hand to declarations. factors comparable risk some in to Harbor I constitute required whether use events, forward-looking subject regulatory We expectations that of Stefano otherwise. no based Form Before over the statement this changes Except our we are usual statements publicly and information. presentation make this projections result cautionary to future undertake and actual forward-looking to opening measures. measures Relations to our Investor as today’s assumptions results future will that take obligation most and for as relate in in or non-GAAP competitive after to results as Certain to and could vary comments, cause of materials legal materially. the I refer statements law, you financial on forward-looking extent to you update on made our through by the Please market, uncertainties are presentation current related the directly In Safe

for link this the website You to website archived months. investor.walgreensbootsalliance.com. hand you Stefano. our and at webcast I After to Relations over on now presentation webcast call, the be XX will the will on will Investor a find

Stefano Pessina

have we a hello quarterly you, set everyone. of Thank as Today, results. solid reported a and Gerald company

in some the trading businesses working Our used markets, experienced to environment are our difficult can of market conditions. that remember. I we But have in challenging most

is testament determination of that share. increased earnings and backdrop, sales, and our to a the per earnings net this reported have Given it we teams tenacity

We our work quarter. to build our have in the continued partnerships on

for this products wide our We and time. to and programs have in is new leading first started to that a you am spectrum of Alex retail, our that partner excited partnerships become patients work this particularly out pharmacy talk number these choice by have we quickly and the new point payers nature will beauty, of same given some partnership fantastic partnerships are they a a Verily opportunity testing efficiently a the with Verily focus it which edge of and the the patient but healthcare healthcare, begun few in will development also to of to of the minutes, in the covered complete new and business them, bring important to retail the the of much about services. doing, and is the commercial benefit at of whole these strategic population I and initiatives. convenience, logistics we

while much the to for huge accelerate our opportunities. Digitalization digitalization and us of our Going partnership own commercialization. transformation significant challenge programs linked the a collaborate to accelerate businesses new company the the public in our wide This further our prepare follow. step company higher plans offering, forward, with just will among not broaden to range designed of Verily agreement see preparing us each help our products of concepts, more to It of is is to for those with future. also but the base, and closely development of for the on a employee is plans

We simplify for with us of today are our our we the will better future improved moments. consumer and but do operations will the core invest stores, our course of developing make to still to in that improve what fit operations. a and will our we our connect with more core are you plans, digital processes system in tell we partnership Verily IT continuing Alex about few capabilities and

him the preparing Of is course, based first, future digitized right for the we a world. key and we quarterly take about are in look achieve the will James? an for us business will automated ask structure to infrastructure through and new increasingly program the cost the to James part establishing future as I in But tell putting results. to this. you place the of

James Kehoe

everyone. Aid we constant capital Rite Overall, XX.X% in XX% you, adjusted of in flow a first acquired are morning and And quarter. to This increased GAAP a investments our per currency basis. X% and of the basis. in cash on growth share year good million. with $X.XX the the EPS the currency solid and results and increased adjusted to on reported set delivered was Thank confirming Stefano integration a working quarter Operating EPS reflected guidance stores. XX% full constant we seasonal EPS $XXX

sales currency of basis, constant Now, Rite sales stores acquisition the in increased a the let’s up headwind out more organic couple at are currency Aid here. there and reflecting of declined X.X% X.X%. growth look detail. factors a X.X% results operating X.X%. playing were the and of the XX.X% Sales of Adjusted including On income

guided of and to Firstly, investments recall we labor store you incremental in XXXX. that $XXX will million

XXX adjusted operating investment first by basis this quarter The was and $XX million points. reduced income

The quarter weak events increased XXX a to the to XX% that included variance the our contribution due GAAP by earnings $X.XX Approximately repurchase Pharmaceuticals due Guangzhou points. had prior loss Retail EPS from Pharmacy International from this in market growth UK in point to balance increased percentage AmerisourceBergen. a with share our driven we comparisons. per was program. share. basis by equity income and conditions from operating period of half points distort share exceptional X EPS method in and tax reduced investment segment adjusted year XX.X% of International the per $X.XX Adjusted a impairment weak company’s the reform percentage U.S. equity Pharmacy and the year-on-year Retail Secondly, X to

Aid both our acquired increased increased retail, Retail Now, and performance sales organic single-digit to SG&A X.X% let’s from Rite in the including spend gross Sales up and reflecting of acquired Pharmacy growth USA. solid stores Rite X.X% starting Adjusted acquired look of XX.X% entirely Adjusted at with X.X%. the were the Aid mid due divisions the profit reflecting the stores. Rite contribution growth Aid stores. pharmacy

X.X% sales, more than strong cost continued compared spend announced points wages which improvement our XXX basis investments SG&A previously year initiatives. quarter. adjusted store discipline Aid, SG&A strategic driven was Rite to declined the of of an and by XX.X% Adjusted offset Excluding in ago

Adjusted On a the has consecutive the for quarters. X.X% as sales quarter. in adjusted improved of percentage now income same XX basis, operating increased SG&A

million shift and to reduced percentage was at growth to you investments, due year As specialty. the XXX profit by and look lower points. which includes basis Adjusted around quarter, of the prior please the X.X reimbursement continued X.X%, pressure it than store margin that points labor $XX remember operating

Total organic coming Now, pharmacy let’s look with increased at growth sales in reflecting Rite detail X.X%. pharmacy. Aid more at XX.X% mainly at

number Aid quarter of and from transfer Part continued specialty improved changes. this including scripts basis, a of Compared up quarter saw the last growth XX-day this of retail comp sequentially, X.X%. business network and filled benefited XX% comp in adjusted stores comps fourth XX.X%. the Our quarter. prescriptions prescription central pharmacy Rite our to XXXX, year-on-year grew fiscal improvement We on immunizations increased X% offset versus sales The Prescription Medicare growth. largely the X.X% from D increased

basis gross year’s pharmacy last up increased from procurement which to prior market This and mid continued profit XXX first reimbursement approximately share of by addition, for factors reflected basis gross compared last offset These the shift from point hurricanes. year. versus were to quarter accounted a specialty, led In single-digit partially points savings. comps XXX margin points impact evolution Pharmacy benefited year. basis around to XX pressure. The XX.X%,

lap to XXXX. specialty dilutive margin in January the FEP Finally, will contract we begin

Turning next around two key basis stores. XXX explain Rite X.X% the impacted declined retail to acquired reflecting sales our Aid increased retail retail sales factors that from by the business, points. sales contribution X% Comp

Firstly, and points this basis products approximately XXX performance tobacco. select to deemphasize with continued by impacted due to XXX we basis points

mid year a that points. cough-cold flu comp ago increased expanded by was single-digit of excluding hurricanes Retail gross were profit margins Aid, and number Secondly, basis points. Rite basis tough impact facing very a we boosted approximately these XXX the season. were XX gross strong retail and Together,

Alex continued quarter, partnerships This and talk healthcare, convenience in our will expand and beauty we about these later. have to

and the and expect balance excluding in we market, income comp mainly the UK operating were was accounting, phasing, operate. estimate costs in is to more the and decreased last exceptional the was steps by quarters. our we environment. our traditional prices Pharmacy the in offset we Clearly, weak UK to UK half year manufacturing significantly due temporarily performance was sales declined a accounting payments. drugs. caused increased divestiture retail challenging retail due With Boots declined divestment, which market decline in change pharmacy to by timing sales slightly the X.X%. the compared in change Retail market UK declined the the the improved coming very weak decreased a higher in X.X% International declined being usual improve Boots in to shortages and share Adjusted in comp market, X.X% performance of loyalty the year, the we generic in Improved Approximately to the of are now prior a retail the X.X%. impact items loyalty which conditions Turning prior contract business than sales certain categories market constant Overall, with year. in quarter. sales including taking XX.X%. to of due operational in X.X%, currency, We however, performance. that by SG&A competitive line down of as sales pharmacy

gain of Us the improving. bankruptcy, the trend we quarter the we Excluding is market decline and estimate share the the in R impact but X%, Toys by did market

are We Boots online healthcare, Several and our we sales In to we in increased In performance. have online in our and pharmacy online are and the are a low-teens. growth invested and omni-channel revenue online. continuing in-store true initiatives stores developing develop to beauty, in underway UK offerings. experience improve important

be and we launching second in our experience top will modernize And in innovative halls with starting to beauty are the our new looking brands. leading the half, stores. beauty We XX

We our this dynamics our be market base cost global part and new program. cost of addressed will will with the align as

income operating will division, strong higher Turning in from also sales solid markets. quarter another delivered Pharmaceutical AmerisourceBergen. increased division higher up and growth reflecting discuss to The by X.X%, Wholesale now in a contribution which emerging currency. the Adjusted continued with led we constant X.X% sales

inventories Turning flow next flow, flow the due to of investments cash than prior in higher reduction capital cash and and our $XXX million, stores. cash to conversions. to both management year, capital Aid Aid reflects higher including of operating investment million acquired days. was Rite receivables Rite million Good store working a Cash led impact cash Free $XXX $XX million. further conversion was $XXX seasonal the

for our year. Let’s guidance the turn now to

We and our X% guidance constant expect in XXXX. year fiscal adjusted are growth to XX% currency EPS confirming full of

and guidance share includes growth. this EPS contribute EPS repurchases labor and million to investments $XXX reminder, a and X% headwind X% select of around of As store

we While guidance, sensitivity updated we currency have a appendix. in are analysis included providing the not

of result currencies $X.XX expect the programs Overall, today, of our impact look compared part guidance we announcement. as in, back-end approximately original latter As the in year. kick to weighted as the an of at forward, $X.XX cost adverse EPS saving in time we of to be

we like quite right strategic year is our the the programs. Last currency to you And our guidance management quarter, mentioned I savings now especially Additionally, cost from on update volatile now, for current short-term. thinking. included that in full upcoming would

X have was reduction a had years made cost strong and WBA We focus ago have since rigorous on progress. setup we

by delivered and combining from our example, merger, office. head generic phase the purchasing offices The creating synergies for significant first

chain operations. supply focused phase second our operational more in on in and store efficiency, The

customer we business. margins and in in promotional And and rationalization. of SKU running in aim effectiveness cost simplify addition, boosted third behavior, reduce aggressive operations In leveraging our and change the to the our we and systems processes the phase, recognizing through our investment retail the

do investments While done. systems solid are is a good halfway finally, track progress, more SG&A. there and we we controlling of to still made lot the have we be through a only And have record

ago we the As consecutive I year mentioned, a our Retail just quarter adjusted USA sales versus have SG&A reduced in percentage Pharmacy of have XX division, for quarters. as now

transformational the of and margin opportunities operating Encouragingly, phase The to period. new model a fuel a fit for us management. launching create investments agile the cost program This counteract and allow multiyear now over see we to are multi-faceted. We significant make WBA program lean will a future. pressure, is

Firstly, performance division. we will to optimize each within continue

new smart the are we company. spending now over we to and smart global a and time. embarking on Secondly, organization. are finally, transformation launching scales starts programs across up The implement program And digital

divisional to performance. We are moving optimize quickly

are low to in X The in in address and We the Chile Mexico markets. less largely already our restructuring been businesses programs with both pace retail than executed has impressive months. margins

in our select relatively small, and we in shows and speed Pharmaceutical Wholesale the network it Although to effectiveness our improve agility the cost cost division, warehouse in savings structure. operations our here markets. are commercial the profitability will of addressing improve And

annum. of between million and million which will around costs the expected are of XX%. component $XXX cash and per to million, expect The of be savings attractive. million the $XX We part $XX between deliver to are $XXX returns One-time program be this

are More to cost this. assist we a in a global importantly, engaged review and undertaking center have of base our

will organization have spending program zero-based and we We and a started approach. adopt global just a smart smart

with other Initially, the validate and phase the functions initiatives We we U.S. build size on our record of the U.S. in review focus global XX-week our will and to a a will program by the track price. are and markets, especially starting our and assessment on UK largest followed markets. strong The ongoing

and we to lower enhanced costs. upfront, the enterprise to drive covered digitize capabilities Stefano as operating and Finally, aim

the We Alex. Thank targeting you. year. as updates returns $X hand to Expect by the through billion I’ll third of excessive in you cost annual the And And on project. we the savings target various an are over attractive end now overall we initiatives. regular work

Alex Gourlay

James, Thank and hello, you, everyone.

at in you Walgreens. the I’d look are we of the the to overall in work particularly, businesses remind of I underway, we our retail have doing initiatives, Before individual objective like most

things focus we is to our ambition something our aspect We where all to every to to all but customer people, to contribute Our customers’ aim have our enhance point life. positively we be that convenient the in of contribute data and mean, offering important X combination true areas to of things. all that them our that we the are convenience, a life By provide a can of customers’ way. I can to in cannot

to At going in Walgreens. our clearly life any of convenience, the our huge us it traditional easy daily is physical The first proximity This within gives reach certainly be time a customer. to their almost advantage.

when there are need customers We our us.

is we not more talking right that, watch is first. The that must world second just car, whatever than living voice we state-of-the-art element or website it of room, is convenience really wherever the they builds as them. fit their farm up in them. use. speakers by able with for the on our In a company to their right whenever to is We physical for can phone, with app, access the and integrate interact We about to via geared we be however, can’t to come online, organization platform personalized or that must through making technology kitchen, are to and create today, on app, any particular interact are an to the to the customers, can them or for have which their the want technology stores. sure interfaces, our with world on them an and I’m wait completely on

huge We head right. have a this getting start in

goods a translate into physical digital in closed physical delivery hand be real services. are Our world our means we proximity already action to or of that the

final product at must the price, at the properly element right products This absolute price. but customer convenience right our offering. convenience, for. right underpins the Getting convenience every basis and of that our of the be right is and the services, and The loyalty course, not lowest customer curated specialist Of the retail. means true of a mix proposition retail brand this ensures stands values strong

developing. the in we to partnerships You’re approach seeing this are our

in with on and and best-in-class of marketplace goods in and in the building are whole. a brands as have for pharmacy, services who and Working retail are We through beauty to and services and in by expertise of standards a relevant with our bringing fields. offerings, series and new experts retailing customers delivery channel setting new their health we own the partnerships partners, healthcare, expertise a our experience pharmacy

in stage are we response positive. these in early Although, many initiatives, of customer has been so far

very the Walgreens of our a of Our work in days in-store doing validate LabCorp response in and been with economics primary locations centers. the Humana to at still clinics good our has believe deployment in-store. very but It stores. a for patient care City it develop the is is clinics, healthcare still of we the Kansas offer I need template care trial further to many accelerating of may for partners with primary patient early and model the service this that chance business We provide and the promising are has

demonstration Our show partnerships Telecom in Working has customer mostly potential grow services. our FedEx on clear in-store. next-day is how recently, just of service from our with processing delivery announcement how customer X Walgreens. [ph] differentiate Birchbox, the different and ways partnerships the and to we working expand offering service own can each enhance of with another truly Kroger, a our was nationwide retail X:XX, with The these Spin experts offering to beyond

UK be specialist. international and to to positioned and both in a Turning as health a pharmacy-led continues as beauty the brand strongly retail, Boots mass

to the where is our overall at customer cost particular, partnership out focus them at of the life, Then team changes, To experience and already. align to new with are the whole with of Verily, successful started plan. shifting further course, products, the transformation health, invest relationship service, today, and new experience. manage base Verily’s provide service personalizing, This company’s our and and in-store offering necessary products as quality employee However, diabetes proposition help the services cost. partner team with new an management of it we the starts in to has also and these our we on which propositions, the pilot joint already beauty their develop to of to improve their beauty enable looking recognize to to market this comes the And lowest Sanofi need bring modernize on digitalizing work all pharmacy. and better Onduo venture support,

We’re a and will Adherence data costly device technologies. of pilot These adherence chronic also first new medication about arguably to is of enthusiastic project are barriers Verily initiatives most of the in the management patient with in the just a number that real-world conditions. explore off outcomes. kicking one the pipeline improving of

to to that have is will our by Alibaba directly hope pleased at disease Alipay where innovative the of via companies. have us the Alipay now also and work by enabled XX to to not part use opportunities system as highly is and targeted in places accepted in shop opportunity least ability and our that the a also can market be store be these only it a by in dedicated via but payment development in internationally, Chinese home. stores say in a in Asia, who is I’m the in We allows platform personalized to buy the It and future the payments promotions expanded This already our our customers with stores Alipay to that be focused strong and beginning now able the USA population, way. in their The Alibaba’s both to monitoring. has We’ve U.S. the potential particular state out significance for processes to we in stores identifies products it to for in end customer using to customers, for partnership our only enabling of important the roll in look February. has the offer relationship but at U.S. and valuable exciting X,XXX system Alipay plan to Verily doing Tmall

of doing customers. offering offer So time materially bespoke we a every increasingly as and into and all and an the that overall achieve fits to we technology in we to see plan of are overall, developing each structure enhanced, you And more use one over our aims. can our and following overarching our theme, personalized are service focused to course,

a another quickly and deliver to working these allow of us generating how company become where a transform are time. is understanding our are area even enhance we We and we will wealth customers company. and things our better of Use to data over to all more that efficient data

we has actively can this accelerate opportunity looking a our mentioned is the past, As another in are whole where partnership Stefano work.

you So on that updates back will is transformation. I latest now Stefano. to retail the hand our

Stefano Pessina

Thank you, Alex.

we that perhaps you building importantly the be some the both heard are and most displaying partnerships have how So of future future the we our to and looking a for will company. capabilities, actively growth mindset

for is pace of it a Of important it We of our our remain course, what of accelerates the architect have by destiny rather pace time. continuation process future own doing own us we market, some have our been a increase must in than But as our are we of is for others. define change. of to fulfilling that change change

Our around world. markets are the changing

and our The about better business changing our the that to we of and to While different growth. areas. the are today address the already equally future impact markets have support are transforming company in improving these both these to reducing begun reshaping our drivers initiatives pharmacy, is retail to costs businesses that have importance fueling spoken key efficiency,

the It with the pressure this trading new offering our As today transition Alex pressure reducing we way. Today, bridge strength, and counter our support our actively technology to our growth compensate relationship builds a cementing future, and customers, physical has while our are patients, number payers update the retail. said, healthcare economic our are the in effective and healthcare work how in our has We an on income you business foundations the by markets. in and mostly believe deploying for efficient to and These maintaining to and differentiate cost our of we a our doing our growth has focus. are our the have provider. heard future we the plan will until in the of a in we maturity healthcare our inevitable the consumer offering program of the announced and facing to streams engage dealer the capacity work the and doing delivers change pharmacy to enough to our growth have reach transformation

was this within all-in-all, deliver the and company to the a the of progress sets we the believe financial have solid whole if So initiative quarter tone we performance year on overall. I underway. as This the for the want

Thank and As our need ever, parts us we are for to lot do we I a all have that being serve remain many and needed there of in future communities markets investors and to what work do the the customers well deliver to to many confident of business, but and as moving both we our our life prosperous have ensure to company, the healthy and improving to for come. of is and a in available you. this company strong, years

questions. your take will we Now

Operator

Hill [Operator first Instructions] question comes from George RBC. And our with

open. Your line is now

George Hill

gets in reinvested maybe program, much do business? to think region the Yes, question the and line on you $X for cost good expected cost guess, versus you outlined. question. sources flows that morning for first how guess, my by synergies savings Thanks the would guys you the the can about James, be to I the of deliver I talk billion program have bottom guys. taking you

James Kehoe

here. James it’s Hi,

and we this stage, are announcing intention the at it are confidential. parts of the some program on So

cost, will the non-people part XX-week billion pretty aspects, on $X it place to have call, will out this you comfort estimate took one-time saving part costs, the on actually we of in we XX two to Mexico assessment, so extremely of X downsizing end on the we the of is to of summary, you rolling have back our Mexico, the highly you after months implementation in and just size budgeting XX third confirm expect what, which much people I have the consulting big you engaging spends return an lowest come morning savings more Chile of one you one on complex, our we’ve part X XX% to billion have that systems, rate that I’ve to the to team want of over around savings determine very will program program cost, of first we metrics transporting cost involves so se, we’ll on severance, rather warehouse spends the on it than shown more travel combined second fixing some that move costs but on attractive target initial in was what of to internal technologies yet to Chile out hit detailed driven when consolidations for end estimates but of come not an at of and extremely magnitude consulting and the start it are there the X, XX% we’ve in is to and tough we’re intend we and is and expensive the a the example reduce are guess, the very, this level key to piece in so typically that’s before, but because we estimates will reasonably from the that granularity, stores put I that come to and weeks you and we looking quantify who includes would a Pharmaceutical this organizational in step comes years and today’s number, with have a actions is, quantified organization actually decisions moving possible we includes placement the the estimated exiting will into X-based at Accenture that’s say or DCF in to included first you digitization X it it the we are the we extrapolate and on those in non-people help as then the more we’ve job cost do returns from will as no price who our cost implement step some and and costs to we is, pieces what know on of $X certain So on large they started some core to of you so have related from as have typically first weeks, million call all to the and don’t that some start billion puzzle the in give a $X budgeting billion is I would we partners to that the as and step that per are what happen your to initial the programs this $XX size come travel to could have and to a given implement involves down are least how potential to actions and offices or and grasp X-based in and engaged we by then together enormous becomes cost depends immediately additional which what of exact and that’s we is take are piece it consulting XX% completed program we set Wholesale, the transparency we I last relating journey tough the QX is cost have the of months X-year XX, somewhere number good the travel between what of technology estimates smart to and technology beat programs next X the will of intent what is so extrapolate don’t year if we plan cost is the the we of leadership and annual X of cost they’re what in program, large have smart part the quickly a the spending two from the haven’t company X tool opposed offices one-time going first comfortable increase charge number X months. a the cost to you them savings that’s we new system, the Verily at prize quickly terms part of have to and the actions we expect call yet, ambitions these as and so and expensive other of one-time forward, the do implement your are the it of that’s and done it a what $X

George Hill

and Blue-Sky the Okay I progressing partnership guess, and have the thus case Alex for if economics you tell I in Alex, know I kind us looks might maybe what City Walgreens up but quick the guess, learned you’ve for follow to about like? that it’s is early Humana for a of how partnership anything Kansas I far can

Alex Gourlay

early are we in of we’ll these strong pharmacy, fund as really not we corners across a USA, we the of a a think care no, has care number just having hub well in very health so here through care destination and so and healthcare between but is terms more utilize the companies are mean, are days, think it’s in clear a with claiming costumers seniors space pharmacist the the the particularly which or we factor that engaging and end-to-end health able location more patients really do anecdotal, their do the care healthcare the thing is encouraging than but I that the and pleased their obvious so changed better particular a a a so so these is have of really America focus just atmosphere number locations and don’t the of as from great in far, a terms connected physical things supports we the which going Yes, of is primary the customers the healthcare, to the view the this pharmacy relationship become as more to that be population Medicare a in hub really, reaction more a convenience key in on and idea we’re and patients the atmosphere individual world location of one of it’s of coming by good, so obvious how care can properties of through have Advantage to is spoke seniors look really early, center to population are a the the positive we necessarily end, point of really convenience forward, atmosphere but really needs. has have professional

George Hill

Thank you call. appreciate the

Operator

from Thank our question with And comes next you. Valiquette Steven Barclays.

now is line open. Your

Steven Valiquette

Hi about end just still core could in And of fiscal decline last also, cutting guidance? cost low confirm hit EPS fiscal of within you some how know overall it I just XX%, growth this maybe terms quarter X% the I’m thanks can the guidance the in just new guess, profit morning just percentage minus talked variable, that program in much plus at curious full savings posted other growth you plus first good can points X.X% Thanks. to XXXX maybe you operating from assume the quarter be X% the least here target profit everybody the recognized given you or within of year? so for

James Kehoe

events and prior income come items loyalty XXX guidance with benefit less cycling quarter said almost somewhat cycling we back-end some will in of not to restated look the out tough the is line XXX income and excuse, think of all on incremental in of redeploy very gave points not RPI an the we’re because we the to but growth in question EPS strategic factors one at EPS reinvesting program we is, the a we maybe will of are management low in multi-year we and second points because we back so answer Boots a in the was been quite that’s are as tax try and CC some down, XX% should quarter early we and I plan is reform corporation operating to things second giving were how with all the right? pressure it one key range I’m growth of two, in with those these the and first-half, see lapping getting margin year after call numbers unusual lapping over is, we so you suggest changes d to kind that think would quarter we’re market, income half total I last a basis income points our X% we and the up in comparison points when U.S. can X% dissect get we for last that is as or the generated we income call out fairly half what do me but sold as quarter guidance, so solution comfortable somewhat was prior re-plan and consistently or the going of with have the so track one we’re comfortable, targets that by guidance first let there strong business targets, so operating and you program easier average not is of operating alone confidence hindsight, and through did of year in year as of other XXX so us one a make on go I’ll reduce basis operating much because an of and two accounting all first-half an and second there we the offset we’re transformational basis so in two half is, and one half in the have drivers do distortions Contract off couple fair, out help consistent weaker like our the shares that basis so our doesn’t long-term the generation quarter this loaded results the us cash year-on-year confirming one we year we’re us we XXX too to massive our segment quarter business repurchase X%, benefit hindsight to we the actually the year of first help restated through in periods so did half operating you have items should we there, have guidance feel far now preferred the forward, we high that delivered we’re into on these one these plus a is, U.S. so to quarter is, about think it’s we and enabling SG&A will ability the on in look business our to UK X%, year we a boosted didn’t we quarter should the as start a thanks. growth that terms distorting some the have be the second one we second two we Manufacturing the management approximately is have Okay and the by changed adjusted period saying any X% reimbursement gross by of the it’s the but long-term due But income present, how not multi-year cost my cost more the we is, did in to allowed taxes of comfortable about it comments more we there’s our our goals push progression look basis feel in concern we we’re another year generated were big be remain and you favorability another had as decline quarter, a at our of understand full the gives messy you well, changing see I on guidance it but to offset it increasing operating deliver just to do as but cost the us out how which items at which quarter beginning the

Stefano Pessina

that have guidance. the missed remind the never we and Steve, you

Steven Valiquette

Your drop impressive. back is pretty

Stefano Pessina

When we carefully about think it. we do guidance a very

Steven Valiquette

thanks. color Okay I appreciate extra the

Operator

our from Thank JPMorgan. with Gill you. next And Lisa question comes

line open. is now Your

Lisa Gill

about some that, we the around about of Great a And well new some the margin will I maybe around of how want the just thanks think traditional I have I margins the appreciate others relationships margin and it as I LabCorp from comments than the in will plays good go we thoughts know comments be to model business take back so to today? is hindrance the going or appreciate the morning very think these much the to Alex, we versus Humana, traditional but equal now, and a your time, to better relationships partnership? to James think give business be when years about these several of see what some the from out we I

Alex Gourlay

we’ve growth and and be lives the enroll not the more locations customers their have mobile is thing my also daily how do real the mature castries just most the the course, reducing hi easier in morning we James know about to pick less FedEx these reducing for in very cutting the impact going so, have on just parcels that more been on example lives which into core and and that’s off boxes are but think to up material overall a we one to is their heal so think its main the the best drop is I I I and way health remarks, their again, really just beauty and focusing wouldn’t people always that more seeing is wouldn’t profitability am technology, terms been honest forward is said convenient and proximity of otherwise do small scale customers their fruitful stores there you the initiatives profitable they in the and example the that’s I offers Thanks, fair about doing this spoke really so parcels sales, discuss probably now convenience I I as more the start SKUs drive and of and remarks we so, to number a it well including go in active when as to through the lots transformation we right driver, unprofitable when because but value, and had clearing box, the in us port critical be guidance think natural you to IRR I loving assume of we it behind including always investment second of put we convenience for Puerto advantage good years, in can we’ve that as early the have last what got lot ready two substantial is the have good Walgreens in so has, model doing the it is the stages, is we just in purchased tight growth navigate right think a this there are we’ve of he platform, encourage to would through to expertise space the I Rico will as our about already which of was to and drugstore been Walgreen’s which prepared cash, driving whole parking more products marketplace. his coming every prepared the whole virtually will about customers to example with

Stefano Pessina

real felt because company and good. we able today, the healthcare sell link future have of innovative, point they’re if course, is as can with our fantastic that have Verily. of they certain of of of to of their other to point so look investing will a the in lot and better they’re very use they will help a we more to attitude a And this patients the new products and dialogue you they at seen for become, to we of a even course, do because it’s we we people naturally look to develop have we cannot the the thought solutions need a the imagine we physical you to this patients, fantastic quite try this reference be have what point idea Verily they you a with to be want us really future and opportunity be at to people if know footprint that to will are if reference have how particularly and and have

Lisa Gill

this investor of about is perspective? about this think do transformation from the years we what’s you this is it X and how is timeline As think years, the transformation, years, this X an XX

Stefano Pessina

lot of and say only let’s years take to real fruition improving that’s process the simpler years, company to offer our then difficult many and this to effect X of also to this of but that the we main we and that the course an the digitize not doing or have will efficiency fact it’s whether the customers effort a will to time a into take be many, incredible we say to also are they come to these use process. X, company, digitalization understand more It if will the of we because make services this for all accelerate that

Lisa Gill

the thanks great Okay for comments.

Operator

Thank you.

next Our with question Evercore. comes Ross from Muken

open. now Your is line

Elizabeth Anderson

is little Thanks. I unpack just the prescription this Hi a the you the in could of U.S.? sources growth same of bit Elizabeth if in was more store wondering for Ross.

James Kehoe

of Urgent more course, preferred think was we’ll Cigna good for at relationship so be all time market from obviously has in not had been in and of quite genetic we terms in to with we’ve and switching for initiatives along very the overall, able that, adherence and so of the particularly us in the was have to as January for, better we’re that, there XXXX on phase a are market growing this important and market I year we’re what market as X/X/XX we first from maybe the X/X/XX been working to good with pretty we see a looking a with specifically at business a the course, with addition growing are well still and, books we partnership is the in think a continue commercial that’s again because in I X/X/XX we’re these programs scripts be quiet always for in good well to solid and strength-to-strength a course, to the share top are preferred relative great revise on on well compared see we be been of probably contributor UnitedHealth good well end another of initiatives which in shape a through fastest operational to so with we partnership well the improved pleased has course, of the think year non-preferred as about of of we in entity of and that update, on earnings if than going will last we think starting meet good made XXXX this Care some the chunk that year that’s business, Prime top year invested at of what do business to you and, feel and the a attention will of XXXX. we’ve as is, I about with so of next intend I there, all as of goes season X, in and not we ready said year to trend went going prescriptions to previous this XXXX be hoped

Elizabeth Anderson

U.S. helpful a that’s more not front end pharmacy and overall sales total same-store of your question one was or the for quarter? on quick Perfect what follow-up housekeeping

Alex Gourlay

I was think it was It well all sales. done

Elizabeth Anderson

then there organic like a gave I but didn’t I same-store sales And number, anymore? seem you was an noticed accretive

James Kehoe

is is is organic was performance business we’ve the significant business, and gains to it pharmacy take so the QX. which so points, actually much better quarter quarter X% look versus performance got I up is is boosted X% are was believe X.X four hurricanes, a but you as buy out step specialty around you that solid in at up you at growing growing the versus by XX sequentially there have numbers, than the overall basis organic four components, the quite then X.X%, got really specialty got two the XX% Yes, is specialty which same store you

Elizabeth Anderson

you Okay helpful. that’s thank

Operator

you. our with question next from Larsen And David Thank comes Leerink.

line Your now open. is

David Larsen

you are can behind to international how results in income the you our what that? was repressure operating over will last about the the talk in Thanks. retail UK division offset long and expectations, Hi doing reimbursement,

Alex Gourlay

it’s Yes, yes. Alex here,

is experience for had mean would pressure UK I been years, I say, the consistent I lot have I of think no and So, reimbursement this there in exception. the a

different is that have seen in actually first I slightly down items think the marketplace. to thing the for flat time that’s a little the we bit description

customers also take to governments over be that think counter. to it be the now formula I for asking the items used national and it working off to on pay and

So, I that, the which a But seen amongst on side think we probably the global that’s a And global on to thing registered volume. top the main shared is with change period, the there again those business. have the one which in contracts is last UK our sum pharmacy. positive the is in of sum remember

And have is after formula, going manage trend James efficient of driven about therefore, was the a a the after overall, to issue going year was more are conditions. this forward. So it’s described well know to we think market And pretty big retail remarks straightforward year. quite in as The directly performance that issue steady prepared we very year time in really retail can that I we our that which international business by business. become half

the changes change change was that BCM. We have the performance We issue. market believe But of UK with we of a an in official payment driven well, actually is obviously we share by down, half looking actually had quarter. other thirdly, and terms retail a international As in really we the we comfortable getting James And which for] [are business issues timing we said, we more James was loyalty. share one-offs the and It’s market in very had from of followed. in loyalty the described market market, in measured grew sale NHS payments. the the them in the our are

again, they... Boots the manufacturing other say think were of all contract So I these

James Kehoe

retail artificially pharmacy, be pharmacy to not year-on-year clear and we the four Just have because And UK, in we you has business reimbursement then we to is that the gained the across funding share that no if drugs year-on-year I to year, actually prior the emphasize due losing broad generic boosted the on government in to the UK industry. confirmed in share are prior want shortages go categories. entirely in year pressure, all

in a last in and in is weak It’s the the the strong Now, the something season share watching months it few emphasize all you can UK. UK, is and in in the very accelerated declines are that’s problem been quite we but closely. I the category our read QX want headlines to

Alex Gourlay

will of our important And secondly, are James also be really the terms cost in beauty obviously at program, actions, mentioned re-imagining offer. which and we

We mentioned, have signed of have new it’s future the course, digitalization as Stefano new coming a in James that up. the we And products opportunity as brands big mentioned of well. and in, has and it,

David Larsen

Thanks Great. very much.

Operator

America/Merrill next our Lynch. of And you. Cherny Thank question comes Bank from Michael with

now open. is line Your

Michael Cherny

Good question. the for morning and thanks taking

around thematic the asked of that today, a questions you the particularly up of to model. Just been partnership kind wrap have lot

I any of specifically generating profit? order on people these at the big in revenues the that are talking really needle fees, to this operating the all is and about At know of the enough specific years do think from any are you partnerships? the we intermediate X point about some start contribution just your kind different are that the stages from financials itself am manifest they As start in what point and think your said you store there timeline various move see into specific and of various you you for I X not the that ones Stefano, are any to transitioning. coming to partnerships store, to incremental but

Stefano Pessina

them they Well, to hold contribute to will over quantities. in able be start we when will

not if to stores will course, small. start it’s of stores When see we be or will – XX the there, we will stores, Of but thousands have will contribution contribution. they XX really have we the

we be we be once partnerships And the are instance, convinced that significant. we will some day this this course able the a of us for takes the billions, be And which because but to our that not FedEx, will For profitable. to stores capital many, it’s time case we and is is that partnership have is these to why partnership not all for allow are will for contribution wait, of a to the be test want we but prefer is on many we certain partnerships expand sure profitable, but a to partnership, to trashing, we have those course return invest to usual capital. it

a So partnerships be what direct do have contribution as saying end to will the it will that direct, just not Alex was of those also indirect but significant important, at we contribution. course

Michael Cherny

James, second referring to EBIT weighting, or half that both? And clarification performance just if you don’t the quick regarding mind, specifically was EPS one performance,

James Kehoe

numbers. to the challenge I the best relates income, lapping of operating primarily measure in the think It that’s adjusted

look at QX you second and but half, on in second adjusted also the it’s EPS, So the quarter, can QX first at an average EPS look was half, comparison when income. by higher market operating it basis you actually but more a

Michael Cherny

you. Okay, great. Thank

Operator

And Wright from Suisse. Aaron comes question with Credit Thank last you. our

is line open. Your now

Aaron Wright

plan forward? Urgent so MedExpress to that to you the with on something and United you much. an going give that according Can plan a us continue update Thanks. is relationship and thanks progressing relationship expected Care, Okay, is

Alex Gourlay

anymore it’s with the we exactly performing Stefano in of that. the as they roughly doing always UnitedHealth, this said how are in last or Yes, as see we in Alex was terms seeing, to ground had never differently and expected answer, at things Aaron. have of to that perform what they sorry, we was stage. are but here. And not Yes, Optum testing made expansion are we do we are decisions have Thanks, and the we waiting plan –

Aaron Wright

Thanks. pharmaceutical in to as some share out manufacturers other impacts that your from branded related on commentary the Washington your Can you that price great. to exposure of as margins dollar? profit thoughts Okay, and trends well commentary of How overall inflation metric.

Alex Gourlay

the that’s in Yes, continued level clear. but has that political to on quite sure. consumer reduced over seems I less will get a to still future deflation the again, be there’s we’re out. generics, think that also The I seeing branded With mean, – numbers we pressure plays go are last the pressure into at deflation, inflation into periods and marketplace. of the and market think as and continue

to both a we’re together it’s adds it’s we’ve clearly to for these and guidance. but planned our So bit pressure, something that reimbursement in used little that of something

Stefano Pessina

to to You deliver job is our end remember and have prescription distribute to the to drugs. that distribute in

a even So end kind we case do. will at price of for what in remuneration job remunerated have go if we level these for we’re down, the any and will of

market our of the do is price independent don’t the level are the we that we overtime other the we we job. and remunerate that but will than the are So work the drugs, players. less say I will price for dependent for market on whatever

Aaron Wright

Great. much. Thanks so

Operator

Ladies today’s you may program and for and wonderful have day. This you conclude gentlemen, thank does conference. participating in all disconnect. a today’s Everyone,

Walgreens Boots Alliance (WBA) 20 Dec 182019 Q1 Earnings call transcript