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Walgreens CFO: Buybacks to help power EPS growth in FY'19

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Walgreens CFO: Buybacks to help power EPS growth in FY'19

Walgreens Boots Alliance Inc. is betting on share buybacks to boost adjusted EPS during its 2019 fiscal year after the retailer's sales have slumped in recent quarters.

Speaking to analysts during a call to discuss the company's fiscal fourth-quarter results, Executive Vice President and CFO James Kehoe said planned share repurchases will contribute 5.5 percentage points to adjusted EPS growth during 2019.

Excluding that boost and factoring in store investments Walgreens plans to make, EPS will expand between 3.5% and 8.5% in 2019, Kehoe said.

"We think that's a strong statement of confidence in the future," the CFO told analysts. The company reported fourth-quarter and full-year 2018 results before U.S. markets opened Oct. 11.

Officially, the company expects adjusted EPS growth of between 7% and 12% for the year including the buybacks. That range is lower than the 18% adjusted EPS growth rate that the company reported for its 2018 fiscal year.

In recent quarters, comparable sales within Walgreens' Retail Pharmacy USA segment have slowed year over year. Comparable sales within the division, which includes both prescriptions and retail merchandise at the company's U.S. locations, grew 0.3% during the quarter ended Aug. 31, a slower pace than the 3.1% increase during the year-ago quarter.

The drugstore chain plans to buy back $3 billion in shares during 2019 as part of a $10 billion repurchase program it announced in June. Companies across many industries have devoted more money to repurchasing shares since President Donald Trump signed a tax reform bill in December 2017 that gave tax cuts to many corporations.

Analysts have questioned Walgreens' plan to grow sales in the wake of CVS Health Corp.'s purchase of insurer Aetna Inc. The U.S. Department of Justice said Oct. 10 that it will approve that deal, pending divestitures.

Walgreens has stayed away from striking a deal of its own, instead announcing and expanding multiple partnerships.

Co-COO Alexander Gourlay told analysts that Walgreens will add another 80 locations to its partnership with wireless carrier Sprint Corp. In April, Walgreens unveiled the partnership, which allows Walgreens customers to sign up for phone service at its retail pharmacies.

The company's other partnerships range from an agreement to open 600 sample collection centers with diagnostic test provider Laboratory Corp. of America Holdings to a deal allowing The Kroger Co. customers to pick up grocery orders at some Walgreens locations in northern Kentucky.