WBA - Earnings call transcript Q3 2022 | Walgreens Boots Alliance, Inc.

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Operator

Good morning. My name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Walgreens Boots Alliance Third Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator President, Relations, Vice may Global Kanaga, you Investor begin. Tiffany

Tiffany Kanaga

year us Thank the Walgreens fiscal Kanaga, you Relations. morning. Global for President third I'm of Vice for of for Good call joining the Investor Tiffany earnings Boots quarter XXXX. Alliance

Joining of Roz our Walgreens. Officer; call Chief Officer; and are Chief Kehoe, our Financial today's John me Executive on Brewer, James Standley, President

conference forward-looking expectations. during the call, statements on always, making and we As projections current based our anticipate

to due outlined a of actual or future information, forms a results obligation materially Our update forward-looking Slide in the those changes differ those events, to including and XX-K with any as on result no statement in number of listed and filed could otherwise. assumptions factors, latest Exchange after new Securities publicly whether and this X XX-Q our presentation,

the our further call. that The on section discuss this the I Walgreens and You to Boots the today turn call Roz. we press will can also over call release the Investors website. slides financial the find during measures in about in non-GAAP release of referenced Alliance will press now this information slides contain

Rosalind Brewer

Walgreens comparisons essential International traffic business comp segment retail their as sales of delivered Thanks, Walgreens increased retail on against Health. everyone. with morning, than and achieved The Boots execution its U.S. AllianceRx multiyear XX% sales basis needs. in depend year. continue operating to Walgreens trends against core at forma quarter the a Tiffany, growth the the with impact challenging in positive growth on and low excluding third very consumers its and Alliance for negative last good growth digits Walgreens more doubled adjusted robust consistent recovery, Sales single currency, pro income constant the solid

is especially that and retail. a business operating more successfully Our navigating impacting now we is difficult are resilient, discretionary model environment

relevance chain managing enhancing disruptions brand We cost our loyalty, omni-channel supply and and owned in pressures our while to have been consumers agile further initiatives. inflationary and through proactive

real to value important commitment Our growth and the At well. strides convenience tremendous time, Shields engine, realize making of our Walgreens strategic for and a XXXX covered Health resonating year-end above same is building next organic partner in with the serve Walgreens our local we've and Health. bringing VillageMD continue communities third line added venture, to lives million. X we're target growth, top number the of

Additionally, launched trials business improve diversity. we to clinical access our and

implement and improve lower our health We consumer-centric, vision that and solutions are care payers. outcomes to providers patients, for moving quickly tech-enabled of costs

further and value. shareholder our our AmerisourceBergen our During our consistent to quarter, The we augments balance partial portfolio align is took action investment better with efforts to with of also the strategic sheet priorities. shares monetization generate

and our also reflecting the evolving beyond have now thorough review business, with rapidly We financial of conditions outcome control. market Boots completed the a challenging

recent results health future uniquely it are an positioned time growing to and The show, the capture and exciting which opportunities value, to presented As to by strong remain is NoX, markets. company. shareholder opportunities for for across continue beauty care our we open all maximize longer term, stay that I and Board will and hold fundamental Boots value to businesses confident these they and

which full sustained our EPS in our of given we are we year single-digit low maintaining adjusted execution, guidance ahead, January. growth, Looking raised

team. priorities: and the the capital align a culture Health; ahead. growth four In portfolio strategic value October, first, positioned and and third, and transform core We business; build a second, next we growth our introduced creation the and stage to fourth, optimize build are allocation; focus in of engine, high-performance well next our drive winning Walgreens years

the initiative all. each and reimagining making well-being as good leading we in becoming are for care are partner local We against progress health

and gain pharmacy care very support a are both UK core will enable strategy. execution sales business good and the U.S. of future reflected aligning our we transforming building health and in and retail that sales continuing million First, several ago. Boots the comp with XX% initiatives U.S. myWalgreens big traction. quarter, customers. of approaching of digital our a a grew milestone membership XX% quarter of is growth XXX the year to on in top the

role remove focusing I about of More about XX% fourth stores critical to X,XXX continue in having UK, focus opened Recently, customer loss from which positive a expanding routine our to will labor in to into microfulfillment are Doctor, partnership now supporting hours, store and to working tech-enabled At prevention fill digital more services, finally, added Online time. over provide as on we've pharmacy, the already automated script together centers allowing communities. already expanded US, I XX% and normal the XXX,XXX U.S., scripts has to care than XX% We're Boots inventory We now already stores. our operating nearly tasks investments total ALTO excess expect the store today, X,XXX Boots reached fiscal is will innovative shrink. return impact be XXXX. to accelerate stores, across head recovery services. volume heading service, want to and which clinical The health orders. a of highlight with are more on and center provider security time And on we which centers X,XXX locations we they microfulfillment pharmacists care patient our

driving share side, are On gains retail across the categories. all major we

overall strong choices calculus to the Now our and corners our our the across what from let fuel a to shift food through will best the we're closely have network health customers aided today the return in uncertainty pharmacy be all should ongoing downturn, established deliberate versus to where always with the considerations, sentiment. the and inflation, utilization maintaining There's levels. given wellness normalized collaborating but as many health We suppliers macro brands due insights well in Boots and and our care of are me start and health record-low take are America be trusted store a competitors. this as consumer, just convenience. and decades see by observing set prioritize ties price seen of we customer UK priority. value and is of consumer discuss we a over opportunity script making to community Pricing with which leadership. trends of gaps Historically, Walgreens of stable

Walgreens address upside see at hours. staffing to at normal we as stores challenges return we Additionally, a enable operating to

front-end our Our owned initiatives. through bolstered loyalty is momentum and omnichannel brand

highly this in transaction to rising comp and Additionally, retail era we growth. offering positive our footprint prices, store of leveraged have gas hyper-local achieve relevant

and U.S. despite the in to of ongoing role Bala website inflation. And customer for robust are raising in-stock as Vice at Marketing ahead Chief This Cost Merchant, managing Staff. slightly Officer, merchandising headwinds. is convenience. been Officer above of and time. served Chief target of Beauty. that newly for We've joined leadership across supply higher fifth organization been our the Walmart of Chief focusing chain Underpinning customers our seeing alongside recently are Klein, retail levels at optimize rejoining quality, spending meeting Chief eCommerce Program where efforts as our Management year the of levels last Transformational Ulta President Calvin new also Target strategy our team with their experience created new is products is value with Linh having stores as We after is the dollars our our the their from on finally, most Luke Rauch strengthened Walgreens Officer, she my also X executives. traffic all and us to are looking and consumers curve Visalatha our through Global in Starbucks, with Peters, Chief Marketing Product We're

resilient We business right support our core in our our customers and to guide to serve have through turbulent the these culture team to times. place high-performance

XX Next, with over to date. resources U.S., I into the progress administered an we endemic vaccinations cross within Walgreens' recap as to the In program and million providing to local quarter want million in we X.X moment take communities COVID-XX the COVID-XX a scenario. to access over in

our and select early begun April, of at of XX Walgreens add as years X to and been resources trusted to older and am population nationwide. offering up aged or adults Walgreens pleased aged X members offering vaccines children As has pharmacy and to certain individuals. in Walgreens that additional Saturday, this aged parents boosters team locations and children provide to follows available eligible to education to vaccines This health their and are May. most guardian. the I newly of readily administer administering boosters immunocompromised older starting has among

has Walgreens experience Our pediatric the vaccine provider in established as COVID-XX the pharmacy largest channel.

populations particularly million socially Pixel curbside personal. most by medically On million we teams by in be industry-leading access initiative goal, it with and to people date. and service is Labcorp, the completed cost and by with health the capabilities is underserved Walgreens health reimagining continue the the tests no in-store of at testing XX in at-home over to who program providers among Last Walgreens network To during important, achieve vulnerable and uninsured, and communities. PCR expanded in-home those COVID-XX. offering help professionals, COVID-XX kits through are care relationships primary care experience we This impacted to for care their X.X care this month, pharmacists, Health quarter build to pickup. in-store creating a front, making

to and launch Walgreens X its rollout Boston quarter. Buckeye XX Shields and its rapidly over business, of significant pace Health of end third million the drove new towards of the payer patients. in of Walgreens organic markets pro continues on VillageMD deals growth with XX% with are Health Shields partner, is VillageMD, by including excited partnership, today systems platform, largest health to sales on now for with our XXX in clinics VillageMD open, Together, forma our Our XXXX. Pharmacy. Health expand Children's the co-located X.X we Plan. signed have In XXX continues

to coverage exceeding development brings lives this our the Importantly, million, target. under X.X XXXX

comprehensive services. on Health COPD this stories. conversations out is for these recent pharmacists to It's beyond first operation, XX,XXX Walgreens' Corners possible inspiring services reimburse the for in made Buckeye in include modeling specific through health multi-phased approach non-adherent. part their and consumer advisors use in clinical people becoming been to to quarter. risk Buckeye Our outreach to inhalers, with XX patients asthma high non-adherent at legislative proactive pilot, and Health of also Health of the some Plan to use changes. state one how reach very pharmacists to counsel hear as patients Ohio, extends logged With expanded payers patients over provide our to predictive to support Corners a collaboration Through

with came for advisor pressure blood potential For conversation complications. a pressure causes had a health its monitor, of example, a our customer who and looking him blood about the in high

saying advisor, talking, and to go saved he and the the new flushed, came thank noticed very he customer's asked were this pressure following As check was insisted room. to the emergency advisor was in it week, to that his the advisor high. they life. face service blood my red The The

consumer-centric model and increased is of engagement convenience working. access, Our

We all optimistic tracking are remain for against Walgreens about year long-term well key potential. milestones our very Health of growth and this our

in hand and enterprise-wide our to sponsors to as can retention drug building billions the With recently goals to trials XX% look The trial comprehensive we clinical of nation clear, their our with diverse among offering care research. results Finally, is I opportunity increase over on forward We especially color I'll well-established end-to-end and health of the participation, ahead. meet and capabilities. patient access goals in in solutions, continued presence launched stated failed sharing our trial populations, more you our by across experience provide time that, more in their part every believe to a leveraging meeting outlook. work James support and and services redefine and it Nearly to of enrollment the increase contributing delays to health of year. dollars and development we frames,

James Kehoe

year with Thank constant you, of a morning. declined broadly Adjusted line basis, On levels. in EPS EPS versus good XX% prior currency our and expectations. Roz, was $X.XX

lapping an to million compared points. EPS of of XX leading year especially headwind XX%. quarter to with an percentage We X.X As prior last were over in administered the current vaccinations XX quarter, mentioned around strong EPS before, year we growth million

on for investments the led our We negative to the X grew in points. growth EPS Health to XX% invest Sales a segment percentage and pro also Walgreens a forma impact basis, of fast-growing business. continued

ahead performing fiscal cash an The free more flow of goal cost billion and $X.X flow flow of markets Cost prior Our is we and initiatives, of by billion. XXXX. billion are raising Transformational retail of AOI international and compared cash to solid, ahead quarter. doubled the business execute now Program our our grew expanding was segment with with $X.X expectations annual U.S. continues to year Management to cash funnel $X.X and year-to-date operating expectations of strongly, year Sales savings than

line maintaining our Finally, single-digit with our was full low third that in we growth outlook in EPS. expectations, of performance year adjusted our are with broadly quarter

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

constant from than AllianceRx Third Health by point from strong impact from currency declined International quarter the contributions basis sales sales the growth at on basis, And a offset X.X% Walgreens were segment. a Walgreens and more sales Walgreens. decline XXX

reflecting operating was EPS of adjusted U.S. $X.XX by If investments decline in the in profit sales sales GAAP strength a settlement as in EPS charges constant income XX.X%, to by with continued you profitability. vaccinations decreased a currency pharmacy driven offset decrease was impact growth State and Adjusted from the Florida Health. in the COVID-XX XX% negative currency quarter, onetime Adjusted declined for Walgreens XX% growth currency in related international basis, year-ago Program. positive from to driven by This charge of retail performance constant opioid exclude on quarter U.S. Management lapped and it in the Cost gross X%. Walgreens million the and peak planned M&A, higher income. mostly partly the operating the solid Health $X.XX, quarter Transformational the a constant AllianceRx a the and in was and approximately $XXX benefit

and point let's Florida Year-to-date by VillageMD basis, retail $X.X investments as our Health Without valuation Now a a $X.X from Adjusted in a related move currency XXX profit U.S. core billion reflecting and $X.XX the settlement quarter. equity by increased the basis, charge profitability. Shields increased in constant partly a and from sales sales Adjusted sales pharmacy across $X.XX, gain to rebound X%. international EPS the company's in X.X% and after-tax Walgreens constant current reflecting negative the income in advanced this lapping AmerisourceBergen the activity, excluding a in the opioid tax growth growth first of both advanced around basis to was billion continued in EPS XX.X% was in XX.X%. offset impact gross the of adjusted year-to-date to operating year-ago GAAP as the currency This negative M&A and AllianceRx. well including the net earnings highlights. a impact period. on on quarter prior legal

sales high up Now retail growth an XXX pharmacy. headwind and offset the a were vaccinations, savings profit of X.X% decreased increased Adjusted retail, spend. the U.S. were at than in offset in single-digit spend decreased let's a XX%, decline. decreased peak XX.X% the against reflecting Adjusted lapping a COVID-XX decreased discipline a labor rates. fewer of X.X%. Lower peak COVID-XX COVID-XX by move performance, from pharmacy by to as AllianceRx marketing lower by this with segment. including AllianceRx. despite X.X%, the of more sales, performance quarter, lower and vaccinations only than partly more X% cost decline was and challenging adverse was impact operating costs Sales Procurement and vaccinations offset COVID-XX point result in comparison and higher vaccinations timing of SG&A reimbursement Adjusted strong quarter. to from mainly offset almost continued mix as performance basis the the SG&A sales points more than by percentage entirely solid year-ago to Walgreens, gross an due a income basis XXX

the detail increased completed XX.X X.X%, sales X%. U.S. pharmacy comp AllianceRx million percentage at quarter administered with vaccinations, scripts seasonal X.X quarter, compared to tests more declined in in Now from Comparable benefited quarter. up look we from and in impacted compared excluding X.X the Pharmacy tests sales X.X year decreased Walgreens. million by X.X%. quarter negatively prior the vaccinations were in but the scripts. COVID-XX the an let's COVID-XX We X.X%, pharmacy. year impact in scripts in million prior million quarter better in Comp Pharmacy XX vaccinations point trends

the temporary volume more gross to challenged be year. Pharmacy basis However, see across chain excluding X.X%, categories offset retail the pressure, shrink of supply stabilizing offset and planned in were impact some procurement items We wellness, were impacted Personal saw in last scripts were an operating and continued growth margin and by did tobacco. up as increased tests to comps due scripts around in merchandise while comp COVID-XX-related peak estimate reductions pressures. quarter. We increased by the tobacco, on and COVID-XX in Comp partly strong and year-on-year management prior margin and than COVID-XX at-home flu. general the to by but cough/cold by the consumables lapped declined points year strong hour we levels, strongly of savings vaccinations health due labor by growth profit XXX quarter, we up decline effective and X.X%. driven care shortages. was adjusted and improvement Gross reimbursement sales X.X%, sales

Turning $XXX was I'll more business with next Germany wholesale our operational markets, schedule. International UK prior reflecting cost quarter. very doubling benefits led Germany strong year, of Boots across had currency sales much growth always, than advancing Sales quarter, international as X.X%, growing a of And with XX.X% growth operating and by is ahead on control. running to million the synergy International all constant income track talk numbers. Adjusted increased the segment. The to wholesale X.X%. integration in versus tight and

XX.X% around beauty XX% footfall XX%, advanced pharmacy strong modest all the digital showed with demand well. services. execution. online services than new from in of total pre-COVID stronger We advanced pharmacy lapped Comp timing around continued is performing Let's quarter, XX% Boots levels. store more in particularly the to footfall quarter, sales the more UK. for increased up saw UK by Travel UK sales strength Comparable the now compared in reimbursement strong commercial NHS across up now slightly growth, retail doubled decreased third year-ago favorable Market in in but compared care improving, NHS reflecting quite X% while pre-COVID. remain led as around look strong Boots Despite came pre-COVID quarter, we to quarter. share sales than remains a Comparable size, below Boots.com sales in locations quarter levels. the pre-COVID with subdued. categories performance, sales channels the in which levels. and detail XX% More volumes basket grew our recovery XX% retail performance. at in retail quarter the from are in health

a Walgreens Turning were in was next expansion. sales basis, increase almost an million clinics, and clinic third million contributing of XXX VillageMD million reflecting advanced the $XX Shields At had the XX% XX% to year-over-year. a Health. sales their Health $XXX a $XXX footprint XX loss expanding $XXX Segment contributing quarter, growth on strong Health million. of with driven Walgreens end forma pro of Organic with Health the across margins, in by and to Investments AOI contract operating Shields health was and sales majority Shields $XX accounted $XX recently the quarter, quarter. a delivered with offset at growth existing more contribution loss growth VillageMD by our clinics profit than VillageMD investments and value-add existing million improved investments. from from proposition million. for the signed quarter. VillageMD AOI wins Pro forma partners. system led

Walgreens some Health. metrics the look key now for Let's of at

partnership XX Buckeye up million of co-located with goal end we December Plan. quarter. opened already 'XX with lives, announced at a exceeded quarter, Health second third XXX strategic at of mentioned, rollout covered of the clinics of end from The the VillageMD our the Roz we and the As X recently continues, have

XXX the calendar progressing this towards are year. We by end of goal of our

XX% goal growth from can changes sales sales pro closing VillageMD at impressive is forma in now a CareCentrix delay Apart assumptions. and no of delivering see, are the Our you reflecting fiscal Shields in And the underlying to our sales combined quarter. that, investment. there $X billion, growth the 'XX of as are with

adversely the the free AllianceRx a by impacted million Free cash flow Year-to-date below Walgreens the next capital the exceptional as in decline and was flow year, flow $XXX to footprint prior initiatives, flow. Free business support. through cash and some behind expansion, Turning including cycled the billion, included new of was digital working $X.X impact cash we $XXX centers million government headwinds. of year-over-year capital a investments. expenditures omnichannel continued our VillageMD impact automated microfulfillment growth the COVID-XX-related increase and cash rollout of also in

Turning guidance. year now to full

maintaining single-digit in We year low growth full are of our adjusted guidance EPS.

growth strong to We our slightly vaccinations. reflect estimate growth have from and and increased X% X% for base to X% front-of-store the business raised performance U.S. X% to testing to

we are full summary, and to expectations growth percentage to I year EPS year-over-year. now vaccinations million the by healthcare compared performing million currency. better business In XX X in that points EPS year you this our line EPS previously. X are XX original the start growth reconfirming in previously. guidance at executing with of Investments this our would remind of the flat single-digit constant expecting negatively points compared We year around provided growth impact well, in than our low guidance is of we

offer additional on I outlook. Next, fourth our will color some quarter

me versus remind year let last this lapping was estimated strong year million EPS quarter driven XX.X The that in growth million by prior an X.X vaccinations administered we year-ago growth with you COVID-XX strength First, year. with a XX%. of are

points caution percentage growth single impacts. investments these and year full expected would EPS. leads I an these prior EPS XX strong aided XX an quarter could low points. include of last results previously, what year-on-year of with of impact to front-end anticipate to around approximately chart at-home to we headwinds in Walgreens EPS headwinds of points labor quarter, in headwinds result and some we amount the XX% our percentage Health build the onetime fourth XX% XX% important saw expected out by to Other fourth most X Combined, to percentage growth. Additionally, said headwind Investments we highlights segment XX% digits. and of year tests. of EPS any Vaccinations gains this year, COVID-XX to are lapping against X on Consistent ones. headwind extrapolation

the biggest health of new For labor is algorithm. and today to booster [Technical variants, dynamics a backdrop, will policies premiums strategic single predict strong drive Against behavior. long-term is it COVID-XX difficult impact include address initiatives Difficulty] this underlying will we how and have costs growth unknown, to short-term growth that reimbursement array our consumer example, adoption,

recover we expect get operating we hours as launch patient normal back to to volume and retention targeted programs. script First,

our and Second, plans momentum demonstrating myWalgreens program, through to U.S. from retail streams. owned a is and initiatives XXXX digital innovation alternative business omnichannel was Fiscal strong growth year, good brand profit loyalty and success. extensive continued and we drive have

at trend very roll build downwards time. margins segment Third, affected year up been clear that as sales next continued the we counteract has running will levels, and XXXX X% out are Health strong by and International scaling achieving see is Trends year-to-date. rising Fifth, Fourth, it is elevated actions the sales segment fiscal year shrink over most Walgreens and expect we to shrink, more retail to recent promising and shrink above the XXXX. of in results, in should growth. is profit the months

Additionally, we year. aggressively Overall, capture various much our lower Walgreens across we headwind in Health investments. the to healthcare than working this expect synergies to are XXXX be EPS

EPS to $X.X continue to overall billion the grow of invest have $X.X Management we program term. to XXXX. fiscal Program remarks. me our for target from over majority initiatives, fully let to expand closing her long achieving growth to we fiscal savings and and remain for Roz teens to Transformational that, With increase 'XX. pass the the raised will benefit billion by In committed low The now are Lastly, it driving Cost we growth back save aggressively sustainable summary, the

Rosalind Brewer

James. you, Thank

making our well despite just business goals on very out heard, progress laid are executing challenges we As and have October. you the we across several in major

very transformation on is I the future. about and track, much Our excited remain

vision significant our out Health are assets; growth As in which we over we and improvements our to recruiting key top team I of making be earnings laser-focused committed strongly each am will managing the to evolving about talent. a priorities. retaining on which reimagining long we many our core a capital term; driving our to two, to strategic world-class be algorithm portfolio results long-term dedicated forward to returns; in updated Walgreens preserving five, is deliver keeping be continue our three, strong one, building local provide the to the our business, we you on: well-being earnings areas to opportunities our our of fourth, expected ahead healthcare all. percentage partner and business; move the to our and growth ability achieve leading as best the for forward, of and further We look and across and our remain ensure optimistic

would I Now like the Operator? to open line questions. for

Operator

Instructions] first JPMorgan. Our Gill with question from Lisa [Operator is

Lisa Gill

keeping around the that health reallocating curious you about about think time then time at Health? initiatives, question that care today. to line that. some into didn't how this the change business this now question. should secondly, want does we that ABC? about the your opportunities would the first really of the It does first at the investments sale as to for just around we announcement I'm you I you made, as change my My investments just really and talk And be around made would you be those think think Boots all? Walgreens all about of make things this play had earlier how the I the week line hear of that around Roz, longer-term as

Rosalind Brewer

for you thank that question. Lisa,

we just Boots. to So came retain how decision few of highlights to me this you give let in terms a

business. discussions, due unexpected diligence such Boots January. ran back And parties started just process. the X began in turn interested you to dramatic the imagine, an change. all, early on XX We off in So high very highly got we as of We with to into first these detailed had confidential of productive us, and a as gained market can discussions a interest we and roughly about beginning at the very

these So decision as continue to for for this Boots any as our to look business same as should But well. the is and a retain to good of do result, we made situations, And be at opportunities the us this enough the business down. strategic thinking time, well opportunity NoX to slow at in it.

is to continue and healthy. the it that So business healthy, remains ensure we'll

in going As the need off talked a line we our at doing that you we look can started businesses, about Boots, of forward, to we time opportunities but with you review our fuller strategic look think we at have portfolio. other about When here.

terms making direction. on terms are forward going there. in is to it's made prioritized and initial moving seen of in that that of Walgreens sure good in state success we've We've line, that we bullish important the Health So investments time stay the that to are investments about our

on So a we're we feel trajectory. good like

So of the will We're line, and parts most that make get continue of we And business sure the and the there assets forward. building running. that to to things. committed is investments important in those terms make to our move still up we time commercial

in that's to well. And businesses, of we're that will do I looking tell terms as work we so portfolio focused will our that continue our on. of that the you the also balance to commitment at

Lisa Gill

comment comment double-digit for anticipate 'XX, that getting comments the that 'XX? of James, about growth. on And term then were believe made you just that, that double-digit that appreciate the back point getting you Is to a you horizon to just making for still growth I you for Or your a clarification, Walgreens? that all that's XXXX longer and

Rosalind Brewer

and take go ['XX]. -- James, ahead, us through Lisa So

James Kehoe

'XX I deck, the compound the said XX% you would it beyond, Investor the go And Day average XX%. and years, think if would rate next to growth annual what to FY then X%. we rise was X to Lisa, October back

beginning beyond at acceleration we're of over And EPS when year, gave of deceleration zero. low and said you of number So said we actually growth where would the this EPS we argue at years. of versus guidance there we would into could have year. growth we 'XX And was a we of digit because X%, measure a that mid-single-digit then ahead we're single the be

market. I out year would to of So low next because we as said year. digit. to getting forward, we we lot the concerns And teens We won't next be there's go a low mid-single teens think look we in said never

have and And of been It total year taken. XX% just take is income. our QX which will by wrong participants multiply calculation. full Some a is about QX X,

these do want they're substantial in because overall So actually proportions. think front I to don't you'll I we I'm do store. be strength, just in rebound think versus we're a fairly Rx strong out doing had how those. it in scripts you to next We lost year have then that stores. we decided on We operational of hit and have. anybody sure should to front-of-store I the lay peer expect do some right the tailwinds The agree, the well And set issues

from substantially this Our still single going down digits at the heavy want in to to year-on-year, very we're add international the growth. Health. timing. do you on We're spending of to point and low year. same-store second margins strength, up Walgreens will -- But we out. X% see are are then looking strength People doing potentially nice because headwind -- on more I to from next year, sales investments And and in go this Health Walgreens half the plus

that elements we out year rate rate to the October, lot did an to growth in Day. Investor the we line growth attractive have X%, we get broadly that is So laid as X with a of compound

to long-term we're doing express with what this confidence in So our is the targets.

Operator

from is with Hill question next The George Deutsche Bank.

George Hill

giving if fiscal of the earnings James, as from have you was I'm 'XX. B headwind. then embedded guess, James, topics. about risk to part to and exposure assumptions Roz well XXXB inquiring kind point around you think a all fiscal of I looks you brought guys 'XX frame earnings the to of about up to we be, wondering as thus should COVID you'd think of like how out kind guess the would the guys what And guess, know program. kind as like as color. as to do from numbers biggest any of appreciate you contribution to what the XXXB I headwind fiscal to I kind 'XX. any think about willing far I'd as the you that you expect Number one or called COVID the I jumping-off we as know minds two I on is, I hit And want be

James Kehoe

a we can that. on want of on through expect give Board I'm own to activity you we on think have process your with I not go think, year. to George, lower we COVID guidance out levels vaccinations will And specific assumptions But our sure next because I this. form

We'll it through negative. So John as risks it when does we over generate why the maybe come we've are sizable But many overall, to we see we're which as earnings. laid have now. right fairly year months. current this a is in that's guidance, sizable equally And which John? guidance And tailwinds. few pass I'll going absorbed headwind next opportunities XXXB, growth with to year. the next our on out But issue be we embedded out and the a we sizable working initiatives,

John Standley

Sure. George, this John. is

said, majority a things we've And a XXXB run think, done manufacturer we've it's hospital so the the business seen and the us. and the our got, entity going that's -- Shields, One model, couple covered operates really and for current We've in just in as is James I specialty in restrictions well. some continued amazing of which that reflected their rate. investment, space, is is actually really a But pharmacy. got

a in position. I So that's very good think

to for really an ultimately, health it's then We have needed. designated in where community And the care the pharmacy opportunity really into XXXB XXXB instances that money back believe our gets program many we be is clients. appropriate

program. we perspective So that it. legislative we're try working and And legal strongly and to a protect a from support

Operator

Michael Our Bank is from next Turney of question with America.

Michael Cherny

the us particularly think So level initiatives see where But you 'XX. gave I talking fiscal you maybe, we're to you initiatives, comfort XX that Slide the growth have do about as and in that growth specifically the variability on the you James, relative know not about on numbers, sway whether Health Walgreens items dynamics How or given those the one international them puts could to you component? the macro back that way tying some that in broader of about think do the those it's whether and volume, script recovery, the takes it's other?

James Kehoe

the thinking of Yes. even versus on next we through we line into we say with couple this the year. we're is variable. have current forecast any I is volume. pressure, happy out. And quite only the a much a to pan assuming months the the sight truly we're we're on coming year, pretty the have fairly Reimbursement the we're had honest. see major sight. line of item and And current change good and say that not challenges, as year. We how see lesser want even would vaccinations testing Where we I'd of

expect -- level why. get reimbursement. we had down don't expect We've called we anything to on many the tell inflation any a had have margins. here, better So in well, now in have where quarters other players wages, X of good confidence we Rising fairly and you market I'll

We have the had actually X are our retail on margins quarters business. up where

have one inflation. initiatives the got omnichannel we've members, on million We a almost right-hand passed side. investments our brand is owned all the I of through, tremendous. think coming hit of myWalgreens XXX has myWalgreens combination growth mix. We've that's And of actually that -- which

great alternative the the of programs profit then we sight of in streams one all those. it's membership line U.S. biggest And and think have I to of

quarter. zero And XXX%. a freight pricing in wages impact got Walgreens has a margin all away think in -- our John on resale, through our management. strong goods business, we've And up And XXXB, visibility. for effectively, Health, overall already year mentioned. offset mind, of we've cost have that, this priced not I we good All bear full inflation increases, very been on international the basis. got the So very as ability is And increases, you'll effective and we've actions to shipping

And level the Day, little and year one as the year. said exiting next would we bit we're are remember there spending We we told this what you a investing year. more in Investor be a

on actually we year. more money to But So have good significantly we next lower, Health more money, this. visibility spend Walgreens is probably slightly headwind and the will

instead to will I most. X%, X% a So said, at of as it X%, go down

these So we this. have all the visible trying quite good to us. I'm change in of is to cover recovery, this visibility international to

the there's double-digit grew saw revenue year, current in quarter. income And be we at all that across won't rate growth in market It You every the consistent the but had quarter. international next single markets.

there visibility Cost good we've called as So $XXX well. million. Transformational Management, up

to one on own visibility offshore engine costs It's actions script as for deliver of savings the be year. cost-effective will is good only give and next office ops, with over back the that's and currently, it We've we entity a will All more on, And office. of business done a called volume. we leverage back Services. have new formed have We'll ramp a up, a we And India. to that time, a of example out has on -- Walgreens the traditional TCS, marketing, big assisted build drive take our own shared the I'll And TCS to will just a partnership Business business. service signed by The merchandising, to growth store the continue But the that we've that deal. tremendous less The business. really are because service. it. happening that's then operate U.S. we service it already all center in HR, moving finance. done And and you will

been. basis QX, have out, in where quarters we've XXX XXX to from where specifically market points a have or of basis back And points We're would investments XXX we So we've market in to had store operating called couple points putting below been liked maybe the the the now. basis in hours. we

we -- has the We churn seen the flipped on of market. we've down haven't the aggressive but that hiring still turnover, switch haven't more slowed in

get months good of us very we So couple sight. experience line we have need before of to a behind where we have of that

question. So I a think it's good

useful think And you we've through the to all us We store on have items good the that's getting here. of sight operations X of only scripts is and hope line ahead I months as probably exception of bag. this. the the

Michael Cherny

one can quicker a No, ask more, I if And maybe I appreciate that. one.

Health about in in for Walgreens talked Walgreens Boots investment, no do the are also other Obviously, something acquire potential you rate review. to capabilities? environment the proceeds the and for inorganic one for further if or there's out investments Health. to build coming You've after you a fund and past that potential about need going the go How the to given think rising inorganic way the

Rosalind Brewer

Yes.

I'll So question. that take

marketplace, further on constantly particularly in we're that I tell at remain for we the opportunities tech the Health. Walgreens So committed enablement. And acquisition looking through side to will looking you

And that on Walgreens early advancement significant circle in in committed we in that have one full Health space. remain acquisition that mentioned back we side, so bring, to as really come we still the the in additional year to order would

that. this. remind also, something how too, to look portfolio And can we terms look that. want still at how could that So we everyone to look of just prioritize we like fund should we we in and I a forward will at have that

So Health. we in committed Walgreens remain in still the marketplace, investments and to we're

Operator

Our question is from Elizabeth Evercore. with Anderson next

Elizabeth Anderson

into the on fourth quarter quarter, particularly and the saying Health, think that next about maybe together and line maybe Walgreens guess sort and next margin should Can of pacing just I in of us gross year. I about you as appreciate things performance shifting of move on the you're then what sort the help tie of of sort forward the year? how we sort in we investments

Rosalind Brewer

Health. Thanks, Walgreens James gross question answer have margin that Elizabeth. on I'll

James Kehoe

timing -- issue. this Yes, basically it's and an is investment

stores, contribution. Year profitability a is run rate, I X, with $X in number is is way of of clinics. versus you gave -- Village. look negative is gross $XXX,XXX. the loss. And million million get is X, the XXX on you're $XX $XXX,XXX XXX almost clinics, and $XXX,XXX year and and investments of to $XX January when to at million, X believe, But in year, it's at that $X it's year on we're the probably margin And are total revenue back indications revenue think of some clinic. we a which prior clinic the strong, And losing all look more best think, got I the the up very number to Shields I to You million full like

in losses, year. X third you're the of And got right? of So years only beginning the turning you've profitable at

So you've to tune XXX-plus XX unprofitable are the around $XXX,XXX. -- got of clinics that

tune the the are You that previous $XXX,XXX. the year of or in ones to unprofitable $XXX,XXX got

gross in is, the and mind, what look the the of this in it's clinic. a you at entire Elizabeth, Walgreens bear -- margin So includes cost when it Health,

got It's it's got the So and got depreciation amortization. the It's the rent. doctors.

loaded. fully it's So

think and So I So more XXX moving year, it. got basically profitable more coming then profitability, will first profitable forward, covers achieve you've that turn more right? And the next as on. clinics ones

So it it's temporary is a way the to will think turn thing, year next about it. and profitable

Elizabeth Anderson

it. Got

to Okay. the close, And the know, that then get CareCentrix, expecting year. I are obviously, approvals by you you have you said of end fiscal

this of estimated would of that and 'XX end sort just then impact But for run annual year. rate So the the for obviously beyond as jumping-off think the we about point broader CareCentrix that deal, $XX billion expect issue timing that to to to change in right? get short-term to trajectory. $X to wouldn't there's billion you Obviously, FY a with the 'XX,

Rosalind Brewer

Right.

of right in thinking with the You're right but we're this about you're forward about that, deal. And in looking still the process you're it. We're way that the about that, to closure thinking way. Elizabeth,

James Kehoe

once Really strong. billion to to $XX very we strong the a line sight billion, CareCentrix $X of have closes,

Operator

next question with Steven from The Barclays. Valiquette is

Steven Valiquette

So questions two interrelated here.

Walgreens for working mentioned U.S. front-end price think competitors. pricing and versus the with business strategy, suppliers gaps first you I maintaining closely is that and retail Roz,

detail less question, where either approximate little this any related small have makes referring potentially of a in you hear frame be to percent, more your sense just could I the percent what retail front on even the mechanics check be a just end, wondering X%. shortages. you So set for may It than the But just it to just supply on way. SKUs examples very witnessing you're then if do just to a it of that SKUs or was to with And of curious box comment. overall

Rosalind Brewer

Steve. I'm Sure. and some ask I'm start the to Thanks, with in fill John on And then details going going off to of that, there. Standley to

store the the mentioned our and terms we exposure seeing of So about in you front end of what are there.

also of apparel, want respect. There items retailers of us kitchen stores that terms other large our retailers what I point. all, you furniture, position a facing to our in So the other have items we're standpoint, that lead supply from some in clarifying like make categories one When of we chain are in-stock that seeing are and are to with televisions, some maybe in long first dramatically different. compare to

working strongly percentage a very against to to our are roughly private-label We quickly, XX% now of We about towards opportunities in private about to get roughly our private-label label. XX% in XX% store. trying and run business of our moving right

along in on. So comes new that could of share XX% we innovation some with in categories. that idea some gives cost of Also, bringing moving the benefits to you later an

he's a store things. and go issues business more we're at kinds of terms some store. looking to in impact seeing when So being terms supply what recession-proof and of of facing into in that chain about I'll let front in of John and little our bit what But detail I those front also of think

John Standley

I pick right just up there. Sure. guess I'll

on formula As of working baby products major of I best things Roz job said, the all we our and the that. generally, can. business it category. And arise. depending supplier that time, partners time to are around our staying we close from and little of to with we're But address to -- working like a partners they as think in getting the done kind closely Obviously, things like issues it through moves a good we've bit

to And months, this between this example. and of several for about just our our a fantastic of our increases we've the have. is position the We relative on closely done to obviously, just mechanics, on pricing at that that thing patients we a dramatically of lot successfully And And work, I the pretty price has really while market. pricing be inflation and think there supply we marketplace. kind really and the managing have hard merchandising through and first we that. kits the chain retailers aligning have in bounced to increase think the come can. through the But test just marketplace kind all around success demand last Talking the operations mitigate Roz best customers The one example. great had as over-the-counter is some really over a really manage supplier is supply cost And and that and partners. and job seen like relationship said, the we've our of try I again, worked can. done team we way do we've with the that really into best cost

So team our again, have think has as job a against they done executing risen. great I pressures those

Operator

session our any it Roz That Brewer question-and-answer to remarks. conclude over I'll turn for today. for will now closing

Rosalind Brewer

we I and against to you Thank looking execution operating want today. our business. joining just what delivered across segments discussed here summarize this and us very growth how a year. really at for robust today are we strong our We've

were our with been last And I the expectations, October. of well results and executing we in want strategic on line remind quarter priorities we've Third to that. broadly everyone shared

improvements portfolio. We to remain in some evolve core Walgreens We our continue will business. to committed our business. make Health We'll our

some to able to this do been tough They manage proud also under We market I'm my preserve this really work of and continue will really conditions. team. outperform and what our has on personal capital world-class team expectations. to continue

further committed about and So I forward make keeping our progress. to remain strongly growth we driving the long-term algorithm, you We're ahead. look opportunities optimistic to as earnings updated we

So thank you for joining us.

Operator

participating. today's concludes this gentlemen, call. Thank and you conference for Ladies

disconnect. now may You

Walgreens Boots Alliance (WBA) 30 Jun 222022 Q3 Earnings call transcript