Walgreens CEO calls consumers ‘increasingly selective and price-sensitive’ as retailer cuts profit outlook
Walgreens’ (WBA) quarterly results are the latest sign that U.S. consumers are under increasing pressure.
Shares of Walgreens Boots Alliance fell 24% on Thursday after the retail pharmacy chain cut its full-year guidance due to challenging pharmacy industry trends and a “worse-than-expected” consumer environment, with management citing a “sustained decline” in discretionary spending.
“In the U.S. retail pharmacy sector, we are seeing continued pressure on the American consumer. Our customers are becoming increasingly selective and price-sensitive in their purchases,” CEO Tim Wentworth told analysts during the company’s earnings call Thursday morning.
The company is the latest retailer to call for a more cautious consumer amid an environment of persistent inflation and rising interest rates. The drugstore chain’s quarterly report comes as the Federal Reserve weighs when and how quickly to start cutting interest rates. Any cracks in the economy could prompt the central bank to act sooner rather than later. Its most recent forecast was for one cut this year.
Walgreens expects adjusted earnings per share for the year to be in the range of $2.80 to $2.95, down from its previous forecast of $3.20 to $3.35.
The challenging consumer backdrop has prompted Walgreens to cut prices across its health, wellness, personal care and seasonal categories.
Jeff Jonas, portfolio manager at Gabelli Funds, told Yahoo Finance that he expects other pharmacy companies like CVS ( CVS ) to face similar consumer headwinds.
“As prices go up in pharmacies, consumers are no longer paying that much. They’re going to Amazon, Costco or Walmart. This is forcing pharmacies to lower the prices of a lot of these products on store shelves, which directly hurts their profit margins.”
Retail sales data for May showed the pace of consumer spending slowed from a year ago, a sign that higher interest rates and inflation are taking a toll on consumers.
Last month, Home Depot’s CEO noted that the home improvement retailer’s results were “impacted by a delayed start to the spring and continued weakness in some larger discretionary projects.”
Also in May, Starbucks (SBUX) stock fell about 16% in a single session after the coffee giant missed its quarterly results, with U.S. same-store sales down 3% versus Wall Street expectations of a gain of just over 2%.
Extended consumers are becoming more selective in the grocery aisles, too, which recently led to a weaker current-quarter outlook from meat giant Tyson Foods (TSN).
On Thursday, investors will watch for further clues about how consumers are holding up with Nike’s (NKE) fiscal fourth-quarter results due after the bell.
Ines Ferry is a senior business reporter at Yahoo Finance. You can follow her on X on @ines_ferre.
