WBA - Earnings call transcript Q1 2020 | Walgreens Boots Alliance, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Walgreens Boots Alliance, Inc First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [indiscernible].

to Gradwell, conference Special Senior Investor like speaker to Projects now Relations. Gerald today Vice would hand over the your and I President of ahead. go Please

Gerald Gradwell

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

risks Before you opening we to assumptions to through results required and competitive, market, this of future to comments, based this and and a result uncertainties Stefano are I in safe vary by expectations events, in regulatory constitute no new the any you and made statements cautionary information, whether presentation legal otherwise. are I subject as on take statement projections forward-looking undertake the publicly over our obligation hand results that to materially. make to of declarations. Certain cause current that update forward-looking extent will, changes could some actual as or law, the future presentation, and Except harbor after usual, to statements

information. the financial financial latest non-GAAP Please related directly comparable materials measures, forward-looking as available they we the statements. for most discussion you XX-K relate presentation Form reconciliations see certain Relations of website, refer our the measures to will on we In a for risk GAAP in appendix use to factors our today's Investor to and presentation,

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

Stefano. will I hand you to over now

Stefano Pessina

Thank you, and Gerald everyone. hello,

a to number have are you That our the and affecting pharmacy underway, we slow of in you the see financial maintaining year-on-year been hear, trading With that a given guidance. it there US comparisons. year a soft are will UK. we said, from our the as environment competitive year. And start will conditions full has As figures, the items initiatives

the four of In against we our progress core priorities. make to quarter, strategic all continued

making are infrastructure significant brings. benefits more a new our and progress data We in cloud-based resources with a that flexible to moving

have good with services to our on businesses. development and We customer of make to the our also opportunities new new a and open teams announce efficient made progress infrastructure, more new experiences, build these a our effective for

shape company closely delivery offering Clearly, the the in this retail work our same on of partners pharmacy with modernize our the time retail At with role footprint. our important future. and longer-term of immediate and and digitalization and the tie and in care redefine thus the of are community work to structure to in the our health working we of the

and course, And during of supported progress –this, substantive all program, made of Transformational our fueled the by Cost has manager is which quarter.

we entered make the efficiency Kroger, Finally, Kroger already procurement on has established In and between that on in the to value with into continued both also venture relationship partnership a and formed growth our Walgreens. of quarter, building significant number announced our we have new and a to strong a been towards businesses. joint progress the

on and a operation, the our two German venture in combined Germany, at reach focus announced performance pharmaceutical few bring with comments significant we of And presentation. end our McKesson a I with come the back to and enhancing wholesale to our of on future joint the market. together scale improving our wholesale make businesses efficiency will in the

in little James? a Now, through I will take to detail. ask Alex us and results James more the

James Kehoe

strong items around EPS Adjusted to performance by including continued X basis. continued by offset the negatively Pharmacy was on lower The lower Retail gross wholesale. International a of margin. impacted management bonus improved year-on-year prior from constant currency a Pharmacy Stefano good $X.XX, Pharmaceutical Retail were saw by USA, comparison In and adverse than and we and X.X% strong morning. be year-on-year you, impacted sales Thank was comp challenging percentage impact. retail cost year U.K points market

Our for or fiscal better Transformational a constant adjusted minus per million, is strong we was with of Cost expect year. prior we flat XXXX. maintaining much basis our than million Program cost $XXX annual on finally, track. currency X%. free Management with the range earnings of And by of of Cash savings $X.X quarter share flow year $XXX plus are generation on And 'XX to in guidance excess a cash very very achieve billion in

XX Looking as but full-year we guidance. business impact EPS and quarter total, impacts. in and of noise timing see second result core year-on-year with improved trends cycle in XX% both some bonus on the In expected no fiscal payments forward, around in we year headwind the these were these have reimbursement budgeted an of items through however of

Let's results. look now detail more the in on

quarter X.X%. income lower were X.X%. X.X% currency currency operating First basis, basis, decline constant gross in a margin declined were the including difficult a was EPS $X.XX a up Adjusted constant sales up on Adjusted currency XX.X% sales of currency reflecting of UK a market. headwind US X% constant and on a

from favorable X additional we from a percentage program X.X tax Our as of number growth points an contributed of percentage points discrete and benefited a rate came items. share repurchase

the funding. the year year lapping included Management items mark-to-market the X transaction Transformational points, and reflected impact, the XX.X% on also adjustments of of supplier Aid result to bonus year relating $X.XX Program. Cost adverse and The implementation EPS declined over prior and including GAAP percentage to Rite costs

X.X% sales sales. Pharmacy pharmacy, retail in growth USA. in by offset increased lower Now to the partially Retail move quarter X.X% let's with

XX.X% X.X XX versus was of Adjusted and our gross decreased gross year. improvement points Note the spend that includes and the sales lower negative pharmacy an program. prior to due due sales, retail of profit, impact declined adjusted of in growth the store optimization profit X.X% basis to X.X% SG&A quarter points percentage

shows were and impact. bonus strong Transformational in more impact Adjusted against offsetting our Program operating execution incremental income savings, Cost year-on-year clearly of the XX.X% than the of declined our investments with The SG&A, decline not enough Management inflation in In points for earlier. and savings these percentage the mentioned gross in adverse operating items profit over decline total I X decline items SG&A of accounted to the adverse offset the income. the

grow look X.X%. Central at increased pharmacy. were Total growth. script pharmacy Now more sales year, let's X.X% nicely Comp and and up prior scripts in continue versus sales up detail pharmacy reflecting comp brand X.X% versus volume X.X% prior grew inflation continued year. specialty to sales

weeks. down XX basis we improved quarter versus the XX.X%, store Market impact weaker was this seen prior have our was for than program. While expected, share including points optimization the in year growth recent from

and gross the pressure. script was adjusted offset profit by of reimbursement procurement growth impact as mid savings more than decreased single-digit,

and Turning retail next store X.X% retail sales by declined impacted an optimization. Total to US improving to retail our declined business. Comp trend. quarter, show the sales in continued X.X%

e-cigarettes, tobacco Excluding comp and sales were X.X%. up

the As sale we e-cigarettes. of you know exiting are

beauty EPS health .We growth not significant have bigger quarter, in X.X%. year around continue comps our categories quarter did it with and full impact we saw anticipate this a this from on a will impact and to solid up a of While have comp next up $X.XX impact X.X% onwards. wellness core the And

of the programs, funding. tailwind low higher prior the timing and declined lower shrink category in single shrink impact year. Adjusted supplier points however, and slightly prior funding timing optimization sales, margins excluding a flu. digits XX declined around estimate margin including of profit basis cold, due store year of with were higher gross Retail supplier from the gross to cough, underlying We line adjusted

the currency constant from Turning reflecting mainly levels higher X.X% usual, next NHS in due Boots increased Sales to pharmacy partly Retail Pharmacy increased International relatively reimbursement [indiscernible] sales and the and numbers. UK X.X% UK volume. and lower to offset script as comp by sales services Chile. quarter decreased

Street sales Boots the X.X%, UK retail High comp to very continued as challenging. declined be UK

adjusted held and income and we percentage impact XX year-on-year was down include lower an impact to points mainly share XX.X% from overall adverse bonus due UK of higher volume sales technology operating investments. However, results The the retail margin. market

also and in X.X% which Pharmaceutical division, in division constant the performance sales The sales growth, markets contributing Wholesale this with have I've the overall by to now impact change quarter lapped which customer strong The the currency. the contract, Turning we up now another Wholesale of Pharmaceutical our I'll X.X% to led emerging UK. delivered UK help mentioned before, contract the change. discuss

Wholesale increased in drug the EPS reflecting efficiency. sustainable from Adjusted scale to profit operating contribution accelerate to improving a Bergen. Europe income by market JV the venture X.X% drive growth aims with leveraging strong performance pharmaceutical joint our accretive we higher revenue to on Mid-term expect be profitable largest growth. and strategic and These Pharmaceutical in McKesson Amerisource

million million $XXX strong flow. versus $XXX flow year. cash on at cash Operating up to million, $X.X next was prior Free flow up billion, $XXX year. cash was prior Turning

initiatives key working Our are capital track. on

the extend of to have period. system, we We strong started industry we to fuel are pipeline removing and excess inventory cash a to a multiyear payment our levels. generation initiatives leading have Ad over flow terms from

have target. and Cost annual this excess cost a by pipeline to much now confidence now gives robust our billion October, our Transformational in fiscal turn savings our exceed momentum, level very a we higher We Let's raised that to In of gaining initiatives Program. $X.X Management target can are savings XXXX. of we billion us $X.X

to and Importantly, innovative the these create models. needed savings will fund allow business us to investments new

resale. some on you activities to spend, our in On we is we program. our opportunities our interesting. procurement the see give Let smart not activities for And energy me in management detail are up efficiency management now program quarter. accelerating goods, energy The ramp

process undertaken leading is the Boots organization, of saves operating invest business example is consumers. improves all perfect money friendly U model. with end-to-end aim we're experience and grow. the of lighting a major This covering effective in smart processes to an to On transforming LED we ultimately a operate, to for environmentally how UK and save lean review store

implementation the XXX of we divisional XXX actively UK the closures. completed and planning the reductions business services in We are On implemented second Thailand. and and of have Chile XXX global of the wave closures Boots cost store Mexico, of optimization have headquarter Walgreens we now XX

to XX new now US stores with small in test we're store We continue results. operating formats the and encouraging

have vendor progressing well. operating model is a optimization our we and implementation work IT, On started of new

On in work recently pharmacy digitalization system. pharmacy the we critical Consulting selected reinventing Services prescription our the example, and we For prioritized partner journey. new operating mass have Tata investments our to personalization accelerate on as

Now, over to I'll hand Alex.

Alex Gourlay

James. taken retail the you the in during of we've some in the I'll US a Thank actions update quarter, with starting you, now offering.

Our with We've in Express positive sales very Tennessee Kentucky just initial results progressing is over seen strong Kroger for running in pilots year pilot for and one risk. so strategic has Northern a far, months. Knoxville, Kroger the well. partnership The been X with

office procurement procurement Kroger in group Building we aligns private both goods. on retail label these success our the the purchase of pilots, formed of December to with

We to chain. expect this the sourcing joint innovation efficiencies venture savings encouraged supply and deliver across generate cost

higher is strategy health quarter. Our and margin wellness on benefits the the living both performances and beauty on in countries delivered of solid focusing

flagship e-commerce performance. NoX mid our enhanced and at Our brand campaign we advertising up nationwide offering introduced we in beauty And sales stores, expect skincare have teens to an well, the which over with performed future reflecting XXX new site. drive

care. health to on Moving

have We X Houston. primary second in villagemd the opened care of locations

of Our which is stronger I to with and four the insurance of XXX process track end brand, open brands. we We're are the Jenny and our the also offers January. coverage optical to pilots partnership consumer improve in converting locations wellness on well progressing Craig by approximately

on that opportunities see In to four these delighted our create partnership our receive And community-based to accreditation. along pharmacies, best we Iraq Healthcare believe access growth I'm that central continue for community-based specialty, continue XXX the capability to Medicare the presence provides medications strong I'll all in we specialty patients marketplace. new In Advantage United with our for fill to

core we our and pleased Health within XX insurance care branded XXXX. designed patient we customers of stores. product, selling October United needs XX to the started are We customer adoption are from very new centers opening navigate help care also walking the And finally, advantage with health Santos, Medicare in

next digitalization. Turning to

care health services. service Fine spanning over Care XX Our providers to has platform

continue outcomes. clinical develop We to better patient adherence deliver to a programs medication

Trip an has of increase now over a Save signed Our refills three million XX% program since patients last up quarter.

omni-channel retail Our consumers demand the convenient continue experience. shopping to

the say XX% up performance I'm record retail had in sales our weekend, were omnichannel versus products. on grow. strong And Overall to continues on to year. the business Friday breaking pleased we over particularly Black prior walgreens.com

have downloaded increased since refill almost million. XX been XX% quarter, of last we refill Our And has Walgreens since Around now to XX% in up eligible times retail our members scripts year. last XX% we're via up Walgreens up $XXX.X digital for million Balance entered channels year. the digital Rewards

Retail year-over-year. initiatives In you reached beauty quarter, improved up starting Make we've X% performance know in of I'm Finally, a Walgreens line on with digitally brand initially International, the our the of introduced we've pleased undertaken our reinvention expectations. that in report XX Boots as the and around second look retail. billion to sales program seen $X.X beauty UK, an half flagship over last in in our just with we've stores these Pharmacy year.

UK we products the on and space largest specializing XXX from introduced have beauty rebalanced retail a Building with in agreement online our and others brands. end, franchise Retail Mothercare, signed of Since new have quarter this, XX in an exclusive the stores British children. we brand babies

across online. goods We the will UK Mothercare selling and be branded

Moving on health care. to

more a XXXX of of new a even pharmacists over Our provide stores, ability our purpose-built and we system certain conditions. over greater range continue to has have pharmacists Boots following pharmacy And UK level services develop pharmacy operating our to new service rolled for write with healthcare to know efficiency time, where prescriptions offerings. diagnostics customer wider out to been the

digital launched journey and progress has May plans I we We services quarter which new mentioned access pharmacy last to for customer care, in to health are the the in pharmacy broaden expanding improve health with initiatives XXXX, markets. solid made developing in that our online care.

digitalization For quarter. growth up on the versus the online with good in boots.com progress year delivered prior strong XX% sales our business

an finally, to sales We omnichannel exclusive Ireland. offer have and with services in record-breaking online and and photo also XX% saw gifting partnership weekend around agreed Black the UK we a Friday resulting up

I'll you closing comments. his now to hand back for Stefano

Stefano Pessina

Alex. you, Thank

are As challenges. the you our a said we challenges Saving generating year. It have impacting guidance heard opportunity. number always The our change with the global the care most opportunities meet ensure these to sector this year see. difficult mindful as are challenges we open act conditions maintaining make must of opportunities of full we the how brings year changes mainly of and health businesses. the We some and that the side, for for

real businesses. having. review We a not having performance maximize right our our our of strategic changes the are dynamic sector. these is -- some the positive in Pursuing a case we we impact priorities But of continuously Group have markets businesses, in will in be our our to The mix are to the ensure impacts driving forever.

will expanded believe shaping in as forward. as I an delivered two I I and going role we our a have a and say for believe strength before as said to strongly much company's have play pharmacy in part I believe have. the business. again, is ability I I in financial these today significant in community ever how healthcare

have quarter, and this generate strong sustainable demonstrated have we we As flow. ability extraordinary cash to

today extraordinary cash And creating years and real flexible for is I of flow and on our foundation company that come. engine doing The our we walk partnership opportunities to have in growth deploy strong are that to value. businesses many this to remain which have to many to convinced create our we our we build. in and a

you. Thank

will Now take we your questions.

Operator

first Sachs. comes instructions] line of question [Operator Robert Jones Goldman from the Your from

open. Your line is

Robert Jones

I'm if taking around next It hearing moving fiscal back decline pieces. thanks. only the down take if EPS steeper given in an I like, there's lot of question. your Great, of pieces year and first quarter, see quarter the some know moving I sounds the in you X% step the was it Thanks full it's James, just a a EPS. quarter the for clear but even guidance, below correctly could

blocks gives you confidence the you if we visibility into give EPS could half the that that back the plus building flat guys you just minus maybe that get can that have back things year. or the about into the you us think I guess half, for X%

James Kehoe

I expect that question, and Yeah, obviously.

little bit the Let me context first quarter. give just give a you on of

weaker and piece in did a was However, growth think and at came was offsetting script budget. want surprise than -- be around first, a had tax, come volume, of that's X had only X% the What we we We the our in quarter favorability budget number XXX point base, come the clear, in we the on to it I we in internal was I were real thinking script expected. QX. And our we first in over on

the on. we So one that was thing disappointed were

were very US. stuff, We millions, lot about, we're flow off by of had driven our free was beat implementing happy the we internal charts, a programs so budget by of largely cash the in hundreds

actions particularly and the frac, now right ahead comments said management cost and US is, your the program classified well our in that's U.K. Stefano to to due of these is As in key transformational question to the answer the

Another have it many that in the first a lost be we on mailed to shouldn't extremely steps started GPO. have good I will it's positive Kroger one the in relationship. And that we highlight finally the think items future. you, I'd up we think We lead things of

term. And strategic we market, then German a drive which think tremendous problematic deal will finally value a longer in wholesale

So there happened challenging. things that and lot was more script was of we was one think a that good the growth

looking Let you momentum surprised little the current-month is, quite December. actually seeing perspective of give in forward me as and we're well, a a a we're bit strong

we call we're quarter, So that. holding items probably the we under out believe of in of percentage of first points five point when

Christmas number, month mid but solid of is periods shifts So the we're our and the at Thanksgiving give between, December. clear want growth in growth call script to I single-digit the period, don't in precise

happening really we're we're regarding that So why are that not shifts the clearly feeling well.

is We December. of buoyancy know cold the in some flu cough, driving

to growth that. December, the quarter. X.X% X.X% seeing are our seeing X% numbers in But be on guidance, now right maybe we of in we're excess of year depending full in to script hit or So do kind that are we to need on signals counting we what the

is growth Tier script as the is key the will drive that increasing the exit performance So year. other X we one,

over as year. take the costs, out Obviously, you course cost take-out is of the the

the savings are roughly quarter in the first So around XX%.

we were of So QX. of, than given total in goal haven't large the well, less number, XX% number, the a

of run year exit we up the the rate savings. As double will be

So overheads will significant become driver a second much very the half. significant more in

do X.X% out of quarter. we of to contracts, I for that, I the impacts combination were our of the with million a region want overheads have the the And volume the million it's XXX for that down And and important to the say amount size have point we in company total is think of bonus XXX the have XXX did we XXX to that's context, million, have of in incremental year-on-year inflation and the you and million. about overheads investments

So indication of initiatives. it management cost some the will give size the you of

think would next program, probably think taxes. on probably just the question, but the year. you on answering for come I I quarter finished cost the opportunity And I your -- favorability if full visibility would we slight to further your again were on we'll back more potential I have a model do will

So somewhat year X.X% a first quarter called we slightly miss and on probably had overheads coming X.X%, the less full gross from will coming in up have we because profit and on from more the scripts.

So tax offset that's the the feel why script delivery we basically of we we that some can feel overheads under in QX. and the it's call opportunities

Robert Jones

the relationship anticipated I in question other guess the That's just helpful. Express tremendously probably announcement. the Cigna And prime prime just wake of again one around

be that think you about how contribute Alliance out relative relationship would the ex XXXX to just how the are would for for played you impact as update and guys Thank relationship past helpful. in you. we prime expectations how to wanted get of or Just the viewing would be this any on your year JV

Alex Gourlay

here. Bob. Hi, Alex It's Yes.

as our prime anticipate relationship. and to direct will with marketplace. is working we working direct PBM a We so with be potentially Express the in model in Prime hold a relationship, have share more us grow Prime to Scripts market re-try and a with now a in prime, was competitive

very so are continues with walk happy one Prime we with situation. relationship independent Blues well a we to continue very with Our strong and the you to be

we've the the budget. readjusted it In but terms in in obviously impact was of margin forecast really of debts

then plan had expected impact for this and we it, So

But On with relationship Prime. again, we AllianceRx have the great doing the is okay a AllianceRx, moment. at

to the, marketplace, of speaking are We we important us. to which do how them even specialty more for ever-changing both at is adopt an becoming

conversations have to further. these expect improve along year next that We model to lines

and view in all the and new benefit from feel year that the good So the confident of we we with will from network, we new, relationship our that very wish success is point primary future. the model

Operator

Your next question of from c Nephron line Research. comes the from

Your line is open.

Eric Percher

from on commentary Maybe to Thank gave impact the was I XX% know context a more the I respect bonus, but cost. you one volume outlook we move on QX and you on bit you the and other and XXXX? reimbursement on thanks for us a hit number, XXXX. with item and to reimbursement as is, think provide it the on can what into little QX cadence

James Kehoe

say was the reference QX really it a in is due May, occurs is due and happened reimbursement no year prior the to is up. timeline X% that year. things specifically is, we it's it XX% contracts reason was a true-up June of prior timing out as And, true And year the other the bonus and the we're April, like in of QX there two typically item, quarter. the the highlighting Yes, in it's would X% called timing year-on-year. to And I reimbursement the to

didn't not in call the anything true-up it's for contract a a prices in actually prior and really a impact because out contract So X of percentage increase it's reimbursement is on points. contractual impact year number QX. We large terms quite of of year-on-year

when gave we of What actually in defined is of first already for together, when broadly sight have or And guidance year, if plans time recall, said put I the were at guidance, so we we that fairly the because contracts XX% quarter. reimbursement within line the XX reimbursement. reimbursement full estimate we we the we to million the gave -- think of said came about decent QX with our was of all XX% you we line

reimbursement. that with to So forecast actually it's quite difficult because we quite were pleased

on know and have presume reason of the highlight you Right sit, on quarters as we QX on for the any some that now up. we on reimbursement outlook looked to just this guidance our something for minus plus we year, reason call giving prior timing or have different no exceptional means of million. And true reimbursement XX should the full back we

QX our I So pharmacy it that And issue reimbursement, in probably to reiterate site. the it procurement, it's, was we net on QX. were slightly to on pleasantly probably with surprised script do all Nothing were with do they volume. actually positive, was with nothing

was be. lighter than So it just we would have planned to it

Eric Percher

really the NHS revenue for That's was And did UK, debt reimbursement didn't the we any last have in helpful. in makeover in it but funding sounds seen improve this new payment it year, you like contract the see the lack line the of simply or

Alex Gourlay

again, that reduce say is, making on One UK a to there marketplace secondly, this can taken actions Alex. we of you it's be profitable. And payment, the to as services which been here. is is have loss them Hi, in on Alex the make have we has some any stabilization So site. in seen more

had reduce we're a we've some of is to honest the result some our caused pleased customers we that -- we've a As with in expected what's with in that's as actions volume, be reimbursement we making slight and to taken revenue offering. for terms actions services the were our decrease the lost these much UK volume of loss not retention as of with not that quite volume. that And

Eric Percher

Thank you.

Operator

comes the Evercore. Elizabeth Your Anderson line from question of from next

open. Your is line

Elizabeth Anderson

or times should versus of thoughts mentioned on and perhaps of terms have alluded on or morning your broadly that's to change little on couple bit pharmacy growth. how potentially pressure in in your in more of A good guys. some you're you of environment Could competitive or seeing of there you the what in US comment a expectations a sort the script sort progressing. Hi, quarter

Alex Gourlay

putting market the accelerated example together. good closely more I of actually what Express deal working the on the consolidation and Prime are this, pressure really a Clearly is marketplace we as vertically the to. and for And as alluding example better Yeah, think both horizontally. has PBMs more in pricing for

hard as pressure we done as So programs that cost to volume. through have and we are said, working has a James through mitigate driving always

very networks part to clearly, in timing fact during rolling the is growth Medicaid lost was volume is that the James summer, that this that to of James of Part access were into going say QX. has that some we we said, year. As particular with and as disappointed them is because some the

And, think we as it opportunity on was with that done for obviously come well in Rx I X, done that Medicaid quarter, through to new under to working -- to changes the more as Medicare, marketplace. to And last pleased we and that we the is really offer business, will model and their January -- behalf the together MA with we continue a well we we're new in operate recognize expect spoke has to in differently relationship become do the we're the comments, very in with investigating and advance efficient us are share the UnitedHealthcare, prepared plan we spoke in the on

well with which less the we're strong Obviously insurance. Aetna is other performer, doing a

less of already said again or there a with but well thereabouts is in the for Prime, to in business be in them reasons, previously well commercial book feel have, Medicare, reply then we have the doing we to in are are whole, important very We obvious maybe contract us with we network. we commercial for a very and the renewed done going we've that in really are pleased which

year. growth I X% view, my volume don't full X.X% we to if picture help we a I and the the that's but underpins know the that's that mean point I of So expect how in see see question. Elizabeth, from to it all and

Elizabeth Anderson

That's perfect. Okay, very Thank helpful. you.

Operator

comes from Your JPMorgan. of the next from question Lisa Gill line

open. Your is line

Lisa Gill

market Thanks very current much. as well branded gross margins around generic we start in how some morning. I'm the to inflation impacted. and wondering, I with will just as As the about this thoughts Good just think procurement wanted James.

First, talk what's current expectation and in guidance. about can your you just

Gerald Gradwell

deflation the this I'll X% would generics for ask of market. a in, then And SKUs Read be mix saw most the X% around QX probably mid-to-higher digit. outperforming and that in internally we What to saw. maybe inflation like branded on I'll tell of and so constant weigh we've what would Alex inflation X% of and around on versus generics say a and that generics. be seen we single basis, we like is we to is would you be seem two we,

we are that number And going kind forward. projecting generally of

in we're Somewhere terms market and market, mid will which deflation versus delivering quarters in single-digit in the but slightly high probably better the it's P&L. mix of reduction the adjustment change the we're generally what seeing to cost in is that's

James Kehoe

know few do want very answer thought it COGS. a our will delivering just as don't operation about beyond I of we who we you you to RVs seeing you reductions so Cost and goods slightly continue and if Mark have see. global in we're we're you good

Alex Gourlay

Yeah, yeah.

Stefano Pessina

number initiatives And Advantage a LabCorp, you then on you to United updates side. that and you didn't talk be talk are plans the to can health-care would about about side, Medicare touch track LabCorp today, on on just about the are any of and on side, to Alex, you you one today on where talked Humana Humana, the expand

I'm just doing Humana priority as know, But well. I'm curious for believer of pharmacy, then speaking, strategic the you're the what you that big and expanding more as with role broadly a in

north the years. that lives. can do finally bigger that million see to you horizon I you But ever that see of change have and in of with way paradigm start you get any actually relationships think that to can you you pressure as the can start the asked know But multiple to for subsiding where ahead do bigger you I've start on where not XXX like reimbursement and us

Now United. of large and in the you Express, about relationships combination think Prime like

Alex Gourlay

think with So Yes Humana start questions. the maybe I

third up really care. a operating opened we've primary looks is good the and -- So very doctors really partners between and in close. pharma relationship on It is the well

the the important be about will EUs villageMD continue joint in at venture sure we up feel you of that test clinical very we've of by two to total So know, really small, with opened good X end Houston the end don't and at I'm course, but February. also

very as to we've to with delivery the and a farmers partnership and company the pleased fundamental very, care court. which well, do see doctor operating we going forward how has pleased and are health we And of of taken that's small again, future the in stake that we're villageMD been that community already,

on model better can we and lifestyles. lots take get unchanged two Core two who of understand to the things medications cost to do their the the out our lending, system together customers

And it walk question. last your so to maybe it's really points interesting on

in So centers on bang the opened. terms number service on Humana LabCorp of track of that's on

this of the we'll I well quarter. have the end XXX think by over in growing

really and on I think bang track under-performing well. that's

We seeing. are

four maybe You don't in, the within know and our of yet program all the ground XXX the scores we very above expect we with and we, or usage on the more, our the promised, pharmacist. we so years of NPS as in centers, expectations, pleased know and

be you fundamental in current are be to hard be fundamental Then drive spoke really James the in as accelerating from our future. we're taking system to out pace the the will We to pharmacists in remarks, really will in prepared that working to that be the system. going our CLO be that freeing get cloud, and called the will up to to date new

seeing payment. getting on very to goalposts this the who payments the Medicare the certain D PBMs they United But working we terms We're the payment. that and they clear in insurers with from because to are get are, stretching we particularly in have like really hit increased to of

follow leads their government forward going we eventually I that the And as insurance KPIs in clear achieving will we've believe -- well. been make successful do will on also sure other that. companies have

play are really appears on. a it's our now right in and yes, progress making more to sure, we're for we numbers committed but So, longer

keep pharmacy believe to more the in we fundamental is and continue a pushing this efficient on fundamental to to We healthcare system US.

Lisa Gill

XXXX. then How conversation, we your we impact just expectation for do I just, think of that longer times potentially term timing heard in should or this And a in about to none from fiscal anticipate just. of XXXX perspective. I this couple you XXXX it that say a understand is so that

Alex Gourlay

you indirect the you'll direct know, or back, Yes. know the some basis well. money already We earning as bit famous

So us I money unmined we to don't. money we did than as back are previously any available growing. more

deploying specific we and money of to we're grows pharmacies. also ability course, as get of Our pharmacy get

achieve performance Pharmacists, think working XXX Okay. we these outcomes. to I are specifically have about

affect So I think start this will to XX XX. and

money there in is XX performance already in improved well us for in in as some It's forecast our, given our networks relief

Lisa Gill

comments. you great, the thank for Okay,

Operator

[indiscernible] next Your the question line Morningstar. of comes from from

Your open. line is

Unidentified Corporate Participant

the taking for you Thank question. The, the so background.

given well. mix a become the that your impacting also initiatives margins mean I is of component lot You've of that, on a business. such have as perhaps been great, is specialties maybe big

Gerald Gradwell

Yes. out adverse pharmacy at so impact points. quarter it's X.X%, mix We of basis that the by versus driving it's basis because about points growing XX single-digit high in scripts it XX of call the

Unidentified Corporate Participant

in kind makes those mean, long-term the of expand that or putting margins guess of also does place help wellness you're the Healthcare provide that I And that part initiatives and sense. kind of the, are transformation. I

Gerald Gradwell

we of practicing Yes, as have to a strongly absolutely, and believe systems. have for know, healthcare models, of and we example who specialty we which presence hospitals I mean, then and course inside pharmacies of X our community in oncology having are have one, you and sort in we doctors

XXX we've plus malls. and have of these patient the for We

diseases So run more we more the of got with means of pharmacy and the which longer unusual. I take achieve are to single because more every a believe in care I accreditation this is we communities. living that the know the foster has will full that manufacturers and that patients attractive patient, with very community, and

will always but and I'm local delivery believe more the model model, will it a important. healthcare central become the So believe important sure, become local more be future fill to of will and model we we the

Shields variance. -- [indiscernible] the a as announced we Also,

platform and with care that's of working have relationships systems. with systems health we a I healthcare think lot

of sure the to being know, by hospitals maintain hospital patients, primarily they themselves you dispense pharmacy. make the on ice drugs As

can investing more in and data take as closely customers and care with both we're a in often make this So look tracking Prime. to customers are it home we offline of again, these as pharmacies community and working well actually technology also sure and Shields, terms of pharmacist an also of course

really a effective also to relationship model, our are now have said most relationships we team, that walk driven and all importantly we both sure the have goes best and to have relationships. we manufacturers through with that the we really our already, it AmerisourceBergen with sure level the and central As very make of with at outstanding make global efficient

while are and manufacturers through So them feel we a in markets to our partner apply capabilities as the and bringing relationship. market we these these can new products and unique for US our global the

Operator

the comes Coldwell from Eric of Baird. question line next from Your

open. is line Your

Unidentified Corporate Participant

it's Thank to you the difficult with expectations. us did your quarter-over-quarter in compared the to give either you know and that out I impact reimbursement but parse very how as clearer well or from to really this much. store a NHS change the on of then the UK sense more shift services as closings the volume could stack scheme up perhaps year-over-year

sounds, little terms the get It that but detail how Thank of okay I'd on through quarters. to few that a quarter-over-quarter, you. also like in the not but only more progresses next

Alex Gourlay

expected. I No, here. Yeah, it Alex it's Sure. we as exactly know was

below of volume, said pharmacy as quarter underlying already, services. up we slightly because in on gave unprofitable market scripts I in the terms both some but some we of So business, the

exactly to relatively expect, industry, what's a resigned the on margin, the contract. had we five easy year called we of UK track tracking the terms expected as is pharmacies one this represents as which to PSNC, through the all the it's because contract this with In in

does transparent. quarter, It it's a in sometimes true way can we quarter carefully. So is vary up but track to quite which from

called we UK. there, the take we've pharmacy We this. some we will of very is operating sight time, transform the for the future that very -- a additional walk that confident got model the have in of line and very This are So feel we piece in well is really of and which to to good course. you working UK confident feel pharmacy operationally in

site which are new half home the including more all out XXXX investing -- present We've a we investment, already farm of we've over state, strongly well Scotland system, countries the rolled mark recently. is and

pretty we're we in years properly improve needs reinvest are over feeling about about we the believe we again feeling ahead. in so committed back the that can operating pharmacy the not But profitability unchanged to So as good getting pharmacy, that further, to model are that very time. of community good we understood visibility,

Stefano Pessina

on surprising, targets the for pharmacy will was Yeah, were to within in that. a profit you impacts of we was if pharmacy tough of general from year UK, characterize target. $XXX,XXX it for NHS were euro the be prior recovery and a were lot there it coming one-time the or this year, of so a want buying year from fundind, gross We

profit fairly in the We gross at looking year. a this are in improvement business sizable

profitability mentioned have we So the sidelines the business as those. Alex that these marginal columns, some and aggressively earlier of we're improvement in driving on

share So a strategic categories don't you volumes and and sub to We're going are the don't be want to we profitability be surprised if marginal addressing definitely positions. slightly. company don't profitability we see think down market script that of the

of the to orientation in bit a the business, slightly a So, in shift profitability. more

by the fixated as actually modeling quarter. So and solid, solid don't it because business out script that just in get is quite your declines core the

Unidentified Corporate Participant

much. Yeah. very you Thank Got it.

Stefano Pessina

and the market U.K it. though the as we've through and I'm the interestingly one whole through the does and have we as it in We overall, come rough down did point really modeling. share on weeks important little quarter quite last our a though maybe of just And to a go seen think couple retail your bit in you share of

there XX% had through a but extremely items whole in was huge period, We on digit decline slow week there extremely high-single not we half month one-time quarter of probably of phasing a time generally that of think just started revenue saw a there lot adverse you of December rough with this month now, the was a was items as one last markets, strong the Christmas growth. out are the our strong second primary very very,

week was prior positive categories and bug of all mid surprise key came a the we year. again single-digit across December then growth year, achieved The last getting with the than the performance year, the bit still the double And we're is have last more out to margins quite quarter just higher of. we was high it

any and and UK the seeing approach in we're chasing -- commercial and So volume we're better not margins. surprisingly the volumes seeing we're rebalancing we're better cost at

markets it's so well. entire, are actually a seen Christmas we've early very Now done to performance but success, quite both two it's the in only period, weeks, December businesses better plus main across too well have child the two the

Operator

of comes Your the from line next UBS. Kevin Caliendo question from

is line Your open.

Kevin Caliendo

thanks taking Hi, call. my for

reimbursement much You PBM your is of point. be at Could variance you've and the mentioned had an we year. when What look guidance and remains of XX% you now Prime. how outstanding gave as the renewed you over there there rest contract really set out this

Alex Gourlay

Hi, Alex here. It's Kevin.

-- can't but there'll Firstly summer change this small majority But back vast I've is contracts so very as sure. feel I -- are. which renegotiating precise majority through Xst go contracted, estimate mean you the can vast the I But, this an have a the number, clear. will in market I'll because starting we always of XX the where midyear the give I'll we for good but so be we start consolidation -- is networks some And give over on as will fiscal we yes, the again January before majority year XXXX. months, move

Kevin Caliendo

Prime a have at renewal any is more through, the like Express all you forward? it takes than impact relationship meaning won't going that that the on contract, one-year And

Alex Gourlay

multi-year a criteria, a is this we length contract. of As typical I but multi-year of mean, commercial longish don't the disclose deal the contracts,

Kevin Caliendo

have guys OECD but corporation were Walgreens you implemented impact looked or proposals, it. -- rules, one way one, are there around multinational any tax wondering obviously still Got they last proposals that? like the just And in at anything if

Alex Gourlay

active to till by better wait according realigned current globally there would and approved think it's legislation location, right -- things, tax then group in the we all we corporate structure new on We it would say jurisdictions this, settles as think a but delivers with obviously the positions, quite extremely to I but We have that a you these it's over -- under vetted it and I comes all have tax all line dust attractive along. policy. in it's expert

sure percentage team set as this. policies, we'll all we that rate a can number have of to maintain globally our the attractive but will adapt but change the compared policies peer much will as possible, tax As points, is over by and for an you quite be try

Kevin Caliendo

Right. That's helpful. Thanks so much. really

Operator

Our comes Bank America. from last from question of Cherny Michael

Your line open. is

Michael Cherny

squeezing for here. in me Thanks

you at pharmacy beginning, role strategy talked you're want to taking, big back I going of question, a tie broader the about I the you the So know I picture forward. mentioned guess

think highlighted of about years. a year of partnerships. You've call I you three number as the -- rest various next the guess different fiscal this two,

to relative you're What essentially bait. if are success kind declare model two these relative cut to checkpoint strategy, of to looking the for the the contribution some of or of relative some of from the partnership to them EBIT all going aren’t,

into the play pretty you through footprint. cost sit also market that about does and where given restructuring the how the but in broader the thought store the and And organization you're a a around base basis role well process going as broad and the on go-forward

Alex Gourlay

Yeah. Michael. Thanks,

start of our store renewed the they key we start the if and reimaging offerings… the think I the priorities drug with So with and know

probably stores and to our into redefinition point which from more really things, because view, relationship is model, the do of big important quite the is that's with to convenience us change on reason allows such a the we’re footfall physical really and it is and marketplace. drive two why Then Kroger the a allows also advanced to important consumer the convenience in of walk important with. us

as itself substantial own box good categories really feeling I in launched also supporting. We've growth are products. in are we sales and in We, remarks, So said we the the prepared our seeing that about you're both also my that.

going about gives as just have XX them brands over and well. this that health customers’ and stores label beauty I composition put we're opportunity XX, own Kroger our their us for private to and in so views got into that to we've XX, think an

day together between the put about And together two then serve customers lastly, $XX when round million we a us. you sets, customer

believe us be we some categories food working to care to a have being procurement health procurement to will walk expert very also money to chain genuine believe other of therefore and allows and issues in America health pharmacy in households our ability a competent strong And medium The relates be American We we strong, the structure in future. wellness. that in of in and to being as the and and very, presence we the with well them course earn So extent other together going on and that's us to in we issues strong believe supply short opportunity. term. the beauty

of with and health area strategically. one sort one are progress learned of offers With into partnership both where lessons the made it. think example brands and well that's and is good of care, optical testing in have our quality others, we I acceleration quality So we tactically

with brands. working who to retailer vision as renowned the are access a very insurance and best are optical We with quality

along in are primary well, to and in be in longer-term side we be to believe communities. delighted Europe We've, that really We model. delivering we our really will from stores put experience that that a to that, more pharmacists, know get doctors can opportunities effective model into end end care

grow. but into digital last and And a platform will marketplace Care grown Fine the have has very to in built time that with that to internal be an future, market team the us become least important really into the not we will quietly will that take but we very believe

where really are that terms that’s we of So in measure.

scripts the healthcare the the of side, over the maybe time come more. hill expect will we but to So side access healthcare over time contribution side -- the than some retail contribution in through faster in and the

Robert Jones

We've progress We've previous the capital one to two back major go this development XXX million launched initiatives, we about question got behind maybe kind digitalization And XXX quarter. guidance of digital to $XXX to expense I of didn't and funded. just of we And year. on and in want get launched but gave. the expenditures this plus

we use the dollars connection that's on marketing believe you One small significantly are your revenue retail for last to better count. how the And effectively to big profile is not range. a investments, we million underpin personalization. mass in with And they launched multi-year million a period. particularly consumer, more two $XX these initiatives the are $XXX will do the And target in

the going on one upgraded, and similar that speed, of be connect more size it's, use very a journey this investment closely to I the it. prescription the, how one and is on And it’s consumer, to second to what's want it process that's generically, systems how again and to prescription, it's deliver is for two-ish and we're do, it's a a year the a to but waiting not two the parallel much they want for core journey pay with the they going

friction cost out transparency will of reduce to to fill will of it the means and system The thing we the getting give of it a cost the which do options the And will consumers and consumers. the it closer you prescription. second take

bump So longer and will don't long-term to boost and out they patients -- and on that multi-year the costs, investments we're lost. working will actually but just revenue revenue drive that boost they and sustainable connectivity are be consumers, large take These initiatives and term the in growth also and they're

Gerald Gradwell

investments in balance you some those of against do and other volatility the moving all and pieces. quickly initiatives just And how of I long-term quarterly guess reimbursement the risks

transformational see… cost that On the you program

Alex Gourlay

tough. It's

Gerald Gradwell

not It's management program our easy. we But have approach.

of are I'm to We capable the but it's but people not every, lot have easy. paying to got we of future, And today. a attention a lot

and As I that you can tell by the made… comments James have

James Kehoe

sit A on of these and people program the are through we X the, it. and Alex, and on management lot of the HR cost funds the Ornella head myself transformational go

to takes So quarters theoretically some can't tough otherwise the of it's future damage long-term and in but a decisions you quickly tradeoffs or company. and to afford small these team, some do are going you it it, of the have frankly you're

Alex Gourlay

we problem have it strategy. in the strategy, a, the And we long-term we that have -- our the Stefano. is pharmacy been always believe believe as a This strategy in future. as the has role Yes, is medium will a pharmacy, in

the be Of and we the the have customers working that and patients pharmacy in to of of able direction. needs the are course to needs will satisfy the

villages. a the will We Not of economy be try invest. the to all course in and to role survive important can the have all that be will pharmacy we the the the or local a not of pharmacies have city pharmacies future,

for take we future. maybe create next for if two survival to term We believe just maybe next now you If at focused will do long try end, long you results. deals. problem quarter, stores, of have our we decision, the the on which have now to of in look invest either the have But the And quarters try is our pharmacies. the and you will or upon better at we, a we the to strategy little just a the a you probably work to

less over Just evidence that that to easier problems have. let's the say, you make

to at the have for and We end be that long hope decided work right. would term I we the

Operator

questions There the back this no turn call I at further are time. presenters. the to over

Gerald Gradwell

ask you. team Thank IR question as we'll you very that. much indeed. your I ask Not that and know take but are to question got Thank the ever, want the calls. to here everyone

you look courses in forward there of speaking quarter. Thank and next indeed. we you again very the to rest week the to tomorrow and During all the much

Operator

conference today's concludes This call.

disconnect. now may You

Walgreens Boots Alliance (WBA) 8 Jan 202020 Q1 Earnings call transcript