Yahoo Finance Walgreens CEO calls consumers 'increasingly selective and price-sensitive' as retailer cuts profit outlook
Walgreens' (WBA) quarterly results are the latest sign that US consumers are increasingly under pressure.
Shares of Walgreens Boots Alliance tanked 24% on Thursday after the retail pharmacy chain lowered its full-year guidance due to challenging pharmacy industry trends and a "worse-than-expected” consumer environment, with management citing "a sustained pullback" in discretionary spending.
“In US Retail pharmacy, we witness continued pressure on the US Consumer. Our customers have become increasingly selective and price-sensitive in their purchases,” CEO Tim Wentworth told analysts during the company's earnings call on Thursday morning.
The company is the latest retailer to call out a more cautious consumer amid an environment of persistently sticky inflation and high interest rates. The pharmacy chain's quarterly report comes as the Federal Reserve weighs when and how quickly to begin cutting interest rates. Any cracks in the economy could prompt the central bank to act sooner rather than later. Its most recent forecast was for one cut this year.
Walgreens expects adjusted earnings per share for the year to come in between $2.80 and $2.95, down from its prior forecast of $3.20 to $3.35.
A challenging consumer backdrop has prompted Walgreens to lower prices across health and wellness, personal care, and seasonal categories.
Jeff Jonas, portfolio manager at Gabelli Funds, told Yahoo Finance he expects other pharmacy companies like CVS (CVS) to face similar consumer headwinds.
“With higher prices at the pharmacy, consumers aren’t paying that anymore. They’re going to Amazon, they’re going to Costco or Walmart. So that’s forcing the pharmacies to cut price on a lot of those front [of] store items, which directly hurts the profit margins.”
Retail sales data for May revealed that the pace of consumer spending is cooling down from last year, a sign that high interest rates and inflation are weighing on consumers.
Last month, Home Depot's CEO signaled the home improvement retailer's results were "impacted by a delayed start to spring and continued softness in certain larger discretionary projects."
Also in May, Starbucks' (SBUX) stock sank nearly 16% during one session after the coffee giant missed its quarterly results, with same-store sales in the US dropping 3% versus Wall Street expectations for a gain of just over 2%.
Stretched consumers have gotten pickier in the grocery aisles as well, recently leading to weaker current quarter expectations from meat giant Tyson Foods (TSN).
On Thursday, investors will watch for other clues on how consumers are holding up in Nike's (NKE) scheduled fiscal fourth quarter results after the bell.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
