Walgreens Boots Alliance reported quarterly earnings and revenue that missed analysts’ expectations and lowered its forecast for 2019 in what CEO Stefano Pessina called the “most difficult” quarter since acquiring European drugstore chain Alliance Boots in late 2014.
The company now expects full-year earnings for 2019 to be roughly flat, compared with its previous forecast of 7 to 12 percent growth, it said Tuesday. The company also said it would cut more than $1.5 billion in costs, up from the $1 billion it announced last quarter.
“The market challenges and macro trends we have been discussing for some time accelerated, resulting in the most difficult quarter we have had since the formation of Walgreens Boots Alliance,” Pessina said in a statement announcing its performance during the second quarter of fiscal 2019, which ended Feb. 28.
Walgreens’ shares slid by about 7 percent in premarket trading.
Walgreens reported adjusted earnings of $1.64 per share during the quarter, missing analysts’ estimates of $1.72 per share, according to data compiled by Refinitiv. Revenue also fell short, coming in at $34.53 billion. Analysts had been looking for $34.56 billion.
It generated $1.16 billion in net income, or $1.24 per share, down from $1.35 billion, or $1.36 per share a year earlier.
On an adjusted basis, Walgreens said it earned $1.64 per share, below the $1.72 per share analysts were expecting.
Executives from Walgreens and rival CVS Health have warned investors in recent months that profits might not be all that fat this year. The Trump administration has been pressuring drugmakers and pharmacy benefits managers to lower consumer prices, both of which may cut into the bottom line for drugstore chains.
Generic drug prices declined and pharmacy benefit managers paid Walgreens less, weighing on the pharmacy chain in the quarter, Pessina said. Walgreens also faced “consumer market challenges” in the U.S. and the U.K., he said.
“While we had begun initiatives to address these trends, our response was not rapid enough given market conditions, resulting in a disappointing quarter that did not meet our expectations,” Pessina said.
Same-store sales declined 3.8 percent, which Walgreens said was primarily because of a weak cough, cold and flu season compared to last year.
Drugstores are trying to diversify their products and experiment with new ways to get people into their stores. Walgreens last week said it will sell CBD products in about 1,500 of its stores, following CVS.
Walgreens is working with LabCorp, Humana, Sprint and others on everything from offering senior care services to selling phones in their stores. CVS is changing up its business model after buying health insurer Aetna for $70 billion late last year.
Pessina on Tuesday said Walgreens will prioritize “expediting the execution” of its partnership initiatives, develop its health-focused stores and optimize its store footprint.
CORRECTION: This story was updated to correct the company’s adjusted earnings estimate. It was $1.72 a share.