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Walgreens posts Q1'19 EPS slightly above estimates, outlines cost-cutting plan

Walgreens Boots Alliance Inc. on Dec. 20 said first-quarter earnings for fiscal 2019 rose 14.1%, slightly above analysts' expectations, and reiterated its earnings guidance for fiscal 2019.

For the quarter ended Nov. 30, the Deerfield, Ill.-based retail pharmacy chain reported adjusted diluted EPS of $1.46 compared to $1.28 in the year-ago period. Analysts had been expecting EPS of $1.44, according to consensus figures compiled by S&P Global Market Intelligence.

Sales in the quarter rose 9.9% to $33.79 billion, slightly below consensus analyst estimates of $33.93 billion.

The drugstore owner maintained its guidance of 7% to 12% growth in fiscal 2019 adjusted EPS at constant currency rates.

The results were reported before U.S. markets opened. In early premarket trading on the Nasdaq Stock Market, Walgreens shares fell 1.5% to $72.18.

In a statement, CEO Stefano Pessina said the company was also launching "a new transformational cost management program, which is targeting annual cost savings of over $1 billion by the end of the third year." That program includes cost-reduction activities in the pharmaceutical wholesale division and in the company's retail businesses in Chile and Mexico. It also encompasses "smart spending and smart organization" initiatives, initially focused on the company's retail pharmacy division in the U.S., its U.K. retail business and global functions.

Fiscal 2019 first-quarter net earnings attributable to Walgreens Boots Alliance rose 36.8% to $1.12 billion from $821 million in the year-ago period. Operating income was $1.40 billion, up 6.1%, while adjusted operating income fell 4.1% to $1.73 billion "reflecting a challenging market and exceptional items in the U.K."

The retail pharmacy division in the U.S. had first-quarter sales of $25.72 billion, an increase of 14.4%, which included the benefit of sales from acquired Rite Aid stores. The international retail pharmacy division reported a 5.9% decline in first-quarter sales to $2.90 billion, reflecting adverse currency impacts. On a constant currency basis, sales fell 3.6%, including negative impacts of the divestiture of Boots Contract Manufacturing in the year-earlier quarter and a change in loyalty accounting. Excluding these items, constant-currency sales fell 2.3%, mainly due to weak U.K. market conditions.