Walgreens Boots Alliance shares fell Thursday after the retailer’s earnings report showed that fourth-quarter revenue had fallen short, despite a boost from newly acquired stores.
Shares declined nearly 2 percent on the day.
Walgreens reported net income of $1.5 billion, or $1.55 per share, up from from $802 million, or 76 cents per share, a year earlier. Excluding items, Walgreens earned $1.48 per share, above the $1.45 per share expected by analysts surveyed by Refinitiv.
The drugstore chain said revenue rose nearly 11 percent to $33.44 billion, boosted by Walgreens’ acquisition of 1,932 Rite Aid stores. But sales were shy of the $33.78 billion analysts had expected.
Walgreens’ U.S. retail pharmacy sales increased to $25.5 billion in the quarter, a 14.4 percent increase from last year. It attributed the increase to prescriptions filled from its acquisition of Rite Aid stores and gains from mail-order pharmacy sales for specialty drugs. The closely followed same-store sales metric rose just 0.3 percent from the previous year.
In the front of the store, where Walgreens sells items like over-the-counter medications and greeting cards, same-store sales fell 1.9 percent in the quarter. General merchandise and personal care led the decline, with growth in health and wellness and beauty sales partially offsetting it.
For next fiscal year, Walgreens forecast adjusted earnings per share to range from $6.40 to $6.70. Wall Street expects $6.45 per share.
Shares of the company have been essentially flat this year.
“We have continued to improve the operational performance of our core businesses and at the same time, we have done a great deal to advance the overall transformation of our company,” CEO Stefano Pessina said on a call with analysts Thursday.
Drugstores are rethinking their businesses as Amazon and other e-commerce business have pressured front-of-store sales of everyday items like greeting cards and cleaning supplies. Amazon further pressured pharmacies this summer when announcing plans to acquire online pharmacy PillPack.
Pharmacy chains are adding more health services to try to keep consumers coming into their stores.
CVS Health is betting on a roughly $69 billion acquisition of health insurer Aetna, a deal the Justice Department on Wednesday gave preliminary approval. Walgreens is counting on a slew of smaller partnerships, including with health insurers Humana and UnitedHealth Group‘s urgent care business, MedExpress.
Also Wednesday, Walgreens and LabCorp announced plans to expand their existing partnership and bring specimen collection sites to at least 600 Walgreens stores. They have already opened 17 locations since June 2017.
Walgreens last week announced plans to partnerwith digital beauty subscription company Birchbox to test a concept in a handful of Walgreens stores where shoppers can fill a kit with makeup, hair and skincare samples. Walgreens sees an opportunity to become a specialist in the beauty category and protect its business from competitors like Amazon.
The drugstore chain also said it would test grocery pickups at Walgreens locations through a partnership with Kroger.
Pessina said Walgreens believes in two partnerships: those with skills and expertise that can either accelerate the company’s own work and those that bring Walgreens capabilities it could not easily develop itself.
“We think we’ve done a good job on the front end in terms of shifting the emphasis to become more of a health, beauty, wellness expert, and there’s a lot more to go,” co-chief operating officer Alex Gourlay told analysts. “And it’s maybe taking us longer than we had first anticipated, but the signs are very clear where we’re heading to and the transition is well under way.”