Walgreens Boots Alliance (NASDAQ: WBA) stock has fallen over 22% in the year so far and over 27% in the past year. The shares opened lower on Tuesday and are trading in the red territory. Investors remained cautious about the company’s future due to lower earnings guidance and the ban on the sale of e-cigarette products in its stores.
The company has discontinued the sale of e-cigarettes due to mounting questions and rising complex regulatory environment. According to the Centers for Disease Control and Prevention, the vaping-related illnesses due to e-cigarettes have claimed at least 18 lives and another 1,080 probable cases have been registered across 48 states and the US Virgin Islands.
The Deerfield, Illinois-based pharmacy-led health and wellbeing company has been hurt by weak stock and disappointing financial performance. The company has been struggling with accelerated market challenges and macro trends. Also, the company faces immense competition in the e-commerce space despite looking for key strategies advancement.
During the third quarter, the company experienced consumer market challenges in the US and the UK due to uncertainty created by government policies. Also, Walgreens has started shifting towards being a specialty health and pharmacy company due to stiff competition in the retail space.
For the third quarter, Walgreens reported a 24% dip in earnings due to higher costs and expenses. The top line rose by 0.7% driven mainly by growth in the Retail Pharmacy USA and Pharmaceutical Wholesale divisions. The majority of Retail Pharmacy USA division came from pharmacy sales, which grew 4.3% year-over-year, driven by higher brand inflation and prescription volume as well as strength in the central specialty.
As of May 31, 2019, the company had cash and cash equivalents of $839 million while total debt stood at $17.61 billion. The company has been striving to lower the debt while using a lot of debt to finance growth. The share value is expected to fall as the costs of debt financing are likely to outweigh the increased income. However, the company has been accumulating additional assets for tackling the interest on the debt.
The company has been trying to grow earnings by closing stores but Walgreens is expected to realize the yield in the upcoming years. The business is expected to position itself for a brighter future in healthcare services. This will turn out to be a worthy catalyst as the management could approve large-scale capital returns.