Walgreens Boots Alliance, Inc. (NASDAQ:WBA) Q3 2023 Earnings Call Transcript

Roz Brewer: So, Ann, let me start off first, just give you a little bit detail on where we are in our store performance. So at the end of the quarter, we had 1,600 locations on reduced operating hours. And we’ve recently optimized those hours in about 500 stores, bringing our current stores on reduced operating hours to roughly 1,100. We’re continuing to see improvements in pharmacy staffing, resulting in almost 1,100 new pharmacists hired in the quarter. And then to the extent that the incremental pharmacists are hired in our most challenged market, we’ve been returning stores to their regular full operating hours. One of the things that we’re seeing is that the initial incentives work. We’re at the point now where we’re seeing the limitation of available pharmacists. And so, Rick, can you go into a little bit more detail on the actual script improvement?

Rick Gates: Yes. And I think Ann you’re trying to get at the 3% growth that we’re talking about through fiscal year ‘23. You know, I think we’ve always walked through those, kind of four key drivers to that script, kind of, growth for us. One is market growth, and I think what we’ve seen in Q3 is that we’ve seen a slowing of aggregate market growth from Q2 to Q3, which is impacting obviously a big part of our underlying performance, it’s there. Roz talked about store hours returning their normal hours, which are lagging a little bit the pace that we had set given what Roz had talked through. But we are seeing some positives as well. The market access that we’ve contracted coming into this year is flowing through in a very positive way.

We continue to have good conversations heading into next year. The adherence and care programs, we are seeing year-over-year growth. They are stagnated a little bit given some of the store hour operation impacts, but we are seeing positive growth year-over-year when you look at access and adherence as well. So although 3% is down from where we earlier guided to, I think, the two things that are most impacting it are market growth, which has slowed quarter-over-quarter and the store hours returning to normal.

James Kehoe: And then Ann maybe I could add. We actually believe there’ll be significant core growth in the U.S. business next year, as well because we’ll be absorbing a year-on-year non-operating headwind from lower sale and leaseback. And then on addition, we mentioned a $290 million headwind on COVID. And maybe go back to the tailwinds and headwinds chart. We have a couple of items, you mentioned correctly, U.S. Healthcare. There’s a couple more transformational cost management program is at least 800 million of savings, and we’ve basically identified those savings already. Two on the front of store business, we have $200 million on of CPI, and that’s essentially more cost optimization and margin improvement. And then we have synergies in the U.S. healthcare business.

So our cost optimization and savings next year, as well in excess of $1 billion. So it’s much more controllable and already defined. Now some of that will be eaten up by wages and inflation plus reimbursement pressure, but we’re well advanced on savings that are controllable savings of over $1 billion and a lot of that is in the U.S. business. We basically give some examples of cost reduction, just the headquarter restructuring. This was done on the corporate head office, and it was done on the U.S. support office. And those 500 reductions were done in the space of about four months, and the savings are in excess of a $100 million. So we’re moving at pace to address the challenges and really going after the cost envelope.

Operator: Your next question comes from a line of Michael Cherny from Bank of America. Your line is open.