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CONSUMER STAPLES: Walgreen Boots (B1 Stable/BB Neg) 4Q earnings call remarks

CONSUMER STAPLES
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Equities gapping +14% higher on the cash open. The comments around reimbursement rates eventually becoming favourable are tough to take at face-value - given benefits not in sight yet. Investors will also need to balance how store closures and any loss of prescription volumes/customers may impact its negotiation power with PMBs heading forward. There does seem to be some stability at the group level (thanks to international and US healthcare) and should help the £25/€26s hold onto reasonable levels.

  • "we have a lessening of the reimbursement pressure in 2025" (despite guidance for still falling margins noting 80% of contract volume signed for next year)
  • "over 2-3yr period will have reset the reimbursement framework"
  • "the 500 store closures are back-half weighted in FY25...so benefits towards then"
  • $100m (will confirm number) benefit to FY25 adj. EBIT from store closures (group guidance is for $1.6-$2b)
  • Clearly looking at continued sell down of assets/equity stakes - as it did this year.
  • It was asked if it will right-size dividends given $1.26b in FY24 looks elevated now; it said reviewing capital allocation holistically.
  • Improvement in VillageMD driven by cost reduction and expects improvement in it next year as well.
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Equities gapping +14% higher on the cash open. The comments around reimbursement rates eventually becoming favourable are tough to take at face-value - given benefits not in sight yet. Investors will also need to balance how store closures and any loss of prescription volumes/customers may impact its negotiation power with PMBs heading forward. There does seem to be some stability at the group level (thanks to international and US healthcare) and should help the £25/€26s hold onto reasonable levels.

  • "we have a lessening of the reimbursement pressure in 2025" (despite guidance for still falling margins noting 80% of contract volume signed for next year)
  • "over 2-3yr period will have reset the reimbursement framework"
  • "the 500 store closures are back-half weighted in FY25...so benefits towards then"
  • $100m (will confirm number) benefit to FY25 adj. EBIT from store closures (group guidance is for $1.6-$2b)
  • Clearly looking at continued sell down of assets/equity stakes - as it did this year.
  • It was asked if it will right-size dividends given $1.26b in FY24 looks elevated now; it said reviewing capital allocation holistically.
  • Improvement in VillageMD driven by cost reduction and expects improvement in it next year as well.