Alliance Boots and Walgreens reassure investors over profit forecast downgrade

Walgreens boss Gregory Wasson and Alliance Boots executive chairman Stefano Pessina revealed forecasted EBIT for 2016 was likely to be $7.2bn rather than initial expectations of between $8.5bn to $9bn.

On a call with investors today, both Wasson and Pessina said they expected pressure on global pharmacy reimbursements, combined with the sharp increases in generic drug prices, to affect Walgreens Boots Alliance’s pharmacy margin.

Pessina said: “Over the past two years, as the healthcare and retail markets have reacted to the changing shape of our industry- frankly in part as a response to our own transaction - we have perhaps allowed ourselves to become a little too pre-occupied with the [Walgreens] transaction, and have not given the attention we might have to evolving our businesses with the markets.

“The completion of the transaction gives us the opportunity to renew our focus; to transform our businesses once again into a shape to lead the market through innovation, efficiency, drive, and reliability.”

Wasson said it is addressing the challenges by developing its customer proposition through Alliance Boots’ expertise and continuing to leverage their combined scale and purchasing power to offset margin pressure. It will also “work closely and collaboratively with manufacturers to drive growth and innovation”, he added.

Pessina added: “Starting, as we are, some way further back economically than we thought we would, it is undoubtedly going to take us a little longer than we had hoped to deliver all the benefits we can see - indeed some of them may no longer be available to us – but other, new opportunities, will show themselves and we must be ready to take them.”

Walgreens today revealed it will acquire the remaining 55% stake in Alliance Boots, leading to a full merger next year under the name Walgreens Boots Alliance.