Walgreens Boots (WBA; Ba2 Stable, BBB- Neg) {WBA US Equity} 2Q (3-months ending Feb)

• On Headline; A revenue beat of $1b+ at $37.1b, adj. gross margin ~in line at 19.1% (c19.14%), adj. operating margin at 2.4% (c2.1%). Improved profitability in US healthcare & favourable tax rates helped adj. EPS beat at $1.2 (c$0.82). Stock is up +2.8% in pre-market, note all adjusted (it had a $12.4b (non-cash) impairment of charge on VilageMD goodwill).
• In US; Pharamacy comparable sales increased 8.7%yoy helped by "higher branded drug inflation", US comparable retail sales fell -4.3% reflecting "a challenging retail environment, channel shift & weaker respiratory season (-0.9% impact from softer cold/flue trends)".
• In Europe: International sales rose +3.2% (cc) with Germany wholesale +5.3% & Books UK +3%. Boots pharmacy was +1.7%, retail +5.9% - its attributing latter in part to increasing market share. Boots.com now makes up 17% of total retail with growth of +16.8%yoy.
• On BS; FCF over the qtr was negative $610m, impacted by -$615m in legal payments and -$379m Boots pension plan annuity premiums. $668m cash on hand, debt (including leases) were slightly up. Debt paydowns (net of issuance) is ~0 over last 6 months.
• On Guidance: cutting FY24 guidance to EPS of $3.2-3.35 "reflecting challenging retail environment in the U.S., early wind-down of sale-leaseback program, and lower earnings due to Cencora share sales". Maintains US helathcare adj. EBITDA to be breakeven/midpoint of guidance (-$50 to +$50m)

WBA singe €26's (Z+112) & £25's (Z+138) little changed. Earnings call is at 12:30pm Lon/8:30am ET; https://edge.media-server.com/mmc/p/78tosw8j/