Walgreens promises return to profit growth as COVID-19 impact eases

A sign rests on a counter at a Walgreens pharmacy store in Austin, Texas

(Reuters) – Walgreens Boots Alliance Inc <WBA.O> on Thursday forecast a return to growth in profit next year, pinning hopes on shoppers coming back to its stores in the second half of the year after a safe and effective coronavirus vaccine is developed.

The drugstore retailer’s shares rose 5% after it predicted a gradual recovery next year, with adjusted profit rising 30%-40% in the last two quarters of fiscal year 2021 following a decline of 17%-23% in the first two quarters.

Walgreens, whose 2020 adjusted profit fell 21%, has cut jobs, suspended share repurchases and closed some of its UK-based Boots stores to save costs and revive profit growth as the COVID-19 crisis hammered sales at its stores and pharmacies.

“We think the UK would be one country where there might be more lockdowns. We don’t see major risk (of lockdowns) in the United States,” Chief Financial Officer James Kehoe said.

Walgreen’s forecast did not consider any profit from its pharmacies distributing future COVID-19 vaccines.

While chances of a large lockdown are low, it could result in a bigger hit to Walgreens’ profit compared to any boost from the company’s role in vaccine distribution, Kehoe added.

Drugmakers are racing to develop a coronavirus vaccine with some of the leading candidates currently being tested in large, decisive studies. U.S. health experts have said a vaccine could be available to many Americans by July of 2021.

The company expects adjusted profit for fiscal 2021 to grow in single digits at constant currency rates. Analysts estimate a growth of about 1%, according to IBES data from Refinitiv.

Walgreens shares, which were last up 3.5%, have lost about 37% this year. The stock is among the worst performers on the bluechip Dow Jones index <.DJI.>.

(Reporting By Manas Mishra and Mrinalika Roy in Bengaluru; Editing by Vinay Dwivedi and Patrick Graham)

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