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(Reuters) -Walgreens Boots Alliance slashed its profit forecast for the year as persistently high inflation hits sales of consumer healthcare goods and demand for COVID shots and tests wanes, sending its shares plunging 8% on Tuesday.
Demand for tests and vaccines has fallen in recent quarters after buoying profits at pharmacy chains for a large part of the pandemic. At the same time, profits have been hit by lower consumer confidence due to high inflation.
“Our revised guidance takes an appropriately cautious forward view in light of consumer spending uncertainty,” CEO Rosalind Brewer said in a statement.
The lowered outlook also hit shares of rival CVS Health (NYSE:CVS), which were down nearly 2% before the bell. Walgreens’ shares were trading at $29.21, on track to open at their lowest levels since 2012, if losses held.
In the third quarter of the fiscal year, Walgreens reported a 0.2% fall in same-store sales at its retail division, compared with estimates of a 2.1% rise, according to brokerage TD Cowen.
Walgreens said its forecast cut reflected “challenging consumer and macroeconomic conditions, and lower COVID-19 vaccine and testing volumes”.
The company said its fourth quarter is expected to be hurt by a higher effective tax rate, decreased U.S. consumer spending and the impact of a weaker respiratory disease season.
It now expects annual adjusted earnings per share of $4.00 to $4.05, from $4.45 to $4.65 previously.
Excluding one-off items, the company reported earnings of $1 per share for the third quarter ended May 31, compared to analysts’ average estimate of $1.07 per share, according to Refinitiv IBES data.
