Beauty seems to be a bright spot for Walgreens Boots Alliance.
Executives highlighted the completion of its first phase of a new beauty offering, complete with a new beauty enthusiast loyalty program on the company’s earnings call Thursday.
“Since the launch, signups and incremental spend among beauty enthusiasts has been above planned,” said George Fairweather, executive vice president and global chief financial officer. “We have increased beauty sales in [the] remodeled stores, particularly [of] No7 and Soap and Glory.”
Going forward, Walgreens plans to include more product lines and expand the number of stores with the upgraded beauty offerings, executives said, adding that the recruitment and training of beauty consultants is taking a bit longer than expected.
During the earnings call, the company called the category out as one that offset declines in other areas in the first fiscal quarter. Net earnings were down 5 percent to $1.1 billion year-over year, with a sales decrease of 1.8 percent to $28.5 billion. Walgreens’ diluted net earnings per share dropped 4 percent from the year-ago period, to 97 cents. Adjusted EPS was up 6.8 percent to $1.10, up 9.7 percent in constant currency.
Walgreens Retail Pharmacy USA operations had sales of $20.7 billion, up 1.4 percent year-over-year, with an increase in comparable store sales of 1.1 percent. Pharmacy sales accounted for 69.1 percent of the division’s revenues. Retail sales at the division slipped 0.9 percent in the quarter, which was impacted by closing certain e-commerce operations. Walgreens previously said it would close Drugstore.com and Beauty.com by the end of September.
The company’s Retail Pharmacy International sales were $3 billion, down 14.4 percent because of currency translation. Pharmaceutical Wholesale sales were $5.4 billion, down 6.5 percent.
Walgreens raised the lower end of its guidance for fiscal 2017 by 5 cents and is now projecting adjusted diluted net earnings per share in the $4.90 to $5.20 range.
“Overall we are pleased with the progress this quarter, with results in line with our expectations,” said executive vice chairman and chief executive officer Stefano Pessina. “We continue to anticipate that growth in the second half of fiscal 2017 will reflect the new strategic pharmacy partnerships we announced last year. As a result, we have raised the lower end of our fiscal year guidance by 5 cents per share. In addition, we continue to work toward closing the pending acquisition of Rite Aid Corporation in the early part of this calendar year.”
The company said it remains in talks with the U.S. Federal Trade Commission about its pending acquisition of Rite Aid, which was revealed in October 2015 and is expected to close early this year. As part of that deal, the company has agreed to sell 865 Rite Aid stores to Fred’s Pharmacy for $950 million, which also requires regulatory approval.