Can Walgreens’ Revenues Reach $150 Billion By 2021?

Walgreens Boots Alliance (NYSE:WBA) is one of the largest pharmacy chains globally which sells both prescription and non-prescription drugs through its retail stores. Further, it also provides pharmacy services like prescription fulfillment through mail order, telephone, and Internet. The end users include retail customers, pharmacies, doctors, hospitals & health care centers. The company faces stiff competition from offerings by its global competitors such as CVS Health, Wal-Mart pharmacy, Rite-Aid, Medco Health Solutions and ICORE HealthCare.

Trefis details the key components of Walgreens’ Revenues in an interactive dashboard, along with our forecast for the next three years. While Walgreens’ revenues have grown at an average annual rate of 6.8% over the last three years, we expect it to slow down to 2.8% over coming years. Growth over coming years will be driven almost entirely by the company’s Pharmacy Drugs segment in the U.S, with its other segments likely to witness muted growth rates. The lower expected growth rate means that Walgreens’ revenues are likely to reach around $145 billion by 2021.

You can make changes to our forecast for individual revenue streams in the dashboard to arrive at your own forecast for Walgreens’ revenues. Additionally, you can see more Trefis data for consumer staples companies here.

Walgreens’ Reports 4 Operating Segments:

[A] U.S. Pharmacy Retail – Pharmacy Drugs revenues are expected to grow at a slower pace over the next three years, as compared to the last three

• This segment includes the sale of prescription drugs and provision of pharmacy-related services in the U.S.
• Walgreens’ number of retail prescriptions have seen steady growth over 2016-2018 and is expected to continue its momentum in the subsequent years. This would enable it to cross 928.1 million in retail prescriptions by 2021.
• While Revenue per prescription has swelled at an average annual rate of 6% over the last three years, we expect it to reduce by 3% 2019 and then grow at around 1% over the next two years.
• This would enable the segment revenues to grow at an average annual rate of 4.2% and cross $80.7 billion by 2021.

[B] U.S. Pharmacy Retail – OTC & Other revenues would cross $28.8 billion by 2021

• The components of this segment include the sale of healthcare and retail products including non-prescription drugs, as well as beauty, toiletries and general merchandise.
• The segment revenues have remained almost constant over the last three years, we expect it to grow at an average annual rate of 1.7% over the next three.
• Slight increase in number of retail stores coupled with improvement in store size and revenue per square feet figure would drive this growth.

[C] International Retail Pharmacy revenues have decreased from $12.8 billion in 2016 to $11.8 billion in 2018.

• This division represents Walgreens’ pharmacy-led health and beauty retail businesses in eight countries.
• Average revenue per store has decreased at an average annual rate of 5.6% over the last three years, which was the main reason behind the segment’s shrinking revenues.
• We expect it to improve from $2.4 million in 2018 to $2.5 million by 2021. This coupled with slight improvement in number of drugstores would enable the segment revenues to cross $12.3 billion by 2021.

[D] Pharmaceutical Wholesale revenues are expected to cross $23.1 billion by 2021

• Pharmaceutical Wholesale mainly operates under the Alliance Healthcare brand and supplies prescription medicines, other healthcare products and related services to pharmacies in 11 countries including the United States.
• Revenues dropped by 2.9% in 2017, before improving by 17% to $22.7 billion in 2018. We expect it to grow at an average annual rate of 0.7% over the next three years.

Trefis estimates Walgreens’ stock (shows cash and valuation analysis) to have a fair value of $69, which is roughly 30% higher than the current market price.

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