Walgreens Sales Drop Amid Falling Demand for COVID-19 Vaccines, Testing Kits

A Walgreens store in Riviera Beach, Fla., on Oct. 25, 2017. Joe Raedle/Getty Images

Drugstore chain Walgreens Boots Alliance saw its sales drop 1.5 percent in the most recent quarter amid a decline in demand for COVID-19 vaccines and testing kits.

In its fiscal year 2023 first quarter results published on Jan. 5, the company—one of the largest U.S. pharmacies—said it administered 8.4 million COVID-19 vaccinations in the quarter, down from around 15.6 million in the same period a year earlier, but up from 2.9 million shots administered in the previous quarter.

Walgreens had been relying on gains from administering COVID-19 shots to help make up for losses stemming from low prescription volumes during the pandemic. However, demand for the vaccines appears to be declining.

Walgreens’s U.S. retail pharmacy segment saw first-quarter sales of $27.2 billion, according to its results, marking a decrease of 3 percent from the year-ago quarter. That was driven by a decline in demand for COVID-19 vaccines and declines in AllianceRx, the company’s specialty and home-delivery pharmacy service.

Meanwhile, pharmacy sales during the quarter dropped 4.2 percent compared to a year prior, despite cough and cold drugs being in high demand amid a flu season that has prompted shortages in the United States.

Walgreens pharmacist Mindy Keeton delivers a Moderna COVID-19 vaccine shot at the AHEPA apartments in Merrillville, Ind. on Jan. 11, 2020. Kale Wilk/The Times via AP

COVID-19 Vaccinations, Testing Drop From Peak

The company’s international segment posted sales of $5.2 billion, down 10.8 percent year over year, which it attributed to an “adverse currency impact” pertaining to the U.S. dollar.

Walgreens did however post retail sales increases of 0.8 percent and comparable retail sales increases of 1.4 percent in the first quarter compared with the year-ago quarter.

“Excluding tobacco, comparable retail sales increased 2.1 percent, aided by strong cough, cold, and flu sales representing a tailwind of 220 bps, partly offset by lower sales of OTC (over the counter) test kits representing a headwind of 170 basis points. Beauty and personal care categories both grew, benefiting from owned brand offerings and improved inventory availability,” the company noted.

Overall for the three months ending Nov. 30, the company posted a net loss of $3.7 billion, or $4.31 a share, which it said was being driven by a $6.5 billion opioid litigation charge as part of a settlement finalized last month to resolve opioid-crisis lawsuits brought by states, and local governments.

“Adjusted operating income was $1.0 billion, a decrease of 42.2 percent on a constant currency basis, reflecting lower volumes of COVID-19 vaccinations and testing compared to the peak prior year period, planned payroll and IT investments in U.S. Retail Pharmacy and growth investments in U.S. Healthcare. This was partly offset by improved retail contributions in the U.S. and International,” Walgreens noted.

Fletcher Pack, 3, holds a lollipop after receiving the Moderna COVID-19 vaccination at a Walgreens pharmacy in Lexington, S.C., on June 20, 2022. Sean Rayford/AP Photo

‘Challenging Operating Environment’

CEO Rosalind Brewer noted that the company’s pharmacy businesses in both the United States and the UK “remain resilient in challenging operating environments.”

Shares of Walgreens dropped more than 2 percent to $36.65 a share in premarket trading and are down 6.13 percent at the time of writing.

The decline in demand for Walgreens’s immunization service and testing kits comes as the Omicron XBB.1.5 subvariant of the SARS-CoV-2 virus reportedly makes up more than 40 percent of new cases in the United States.

Data from the U.S. Centers for Disease Control and Prevention (CDC) shows that the Omicron XBB.1.5 subvariant made up 40.5 percent of the total new COVID-19 cases in the country for the week ending Dec. 31, up from 21.7 percent in the week ending Dec. 24.

The World Health Organization has said that the latest subvariant is the most transmissible version yet and has so far been detected in 29 countries.

However, Dr. Barbara Mahon, the director of the CDC’s proposed Coronavirus and Other Respiratory Viruses Division, told CBS News late in December that there is “no suggestion at this point that XBB.1.5 is more severe” while noting that the pace of new hospital admissions from COVID-19 is currently lower than this time last year.

Reuters contributed to this report.