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Trefis: What Are Walgreens Key Sources of Revenue? Publication info: Weblog post. Newstex Finance & Accounting Blogs , Chatham: Newstex. Dec 31, 2019.

ProQuest document link

FULL TEXT Walgreens Boots Alliance (NYSE:WBA) operates a network of around 14,000 retail pharmacy stores globally, and it

sells pharmacy and retail consumer healthcare products. We have divided the company’s sales in three segments

~ Pharmacy, Retail, and Pharmaceuticals Wholesale. The Pharmacy business, which makes revenues by sales of

prescription drugs and provision of pharmacy related services, is expected to contribute $84 billion to Walgreens

fiscal 2020 revenues, making up 60% of the company’s $140 billion in expected revenues for fiscal 2020. Its other

businesses, Retail and Wholesale Pharmaceuticals are expected to generate $35 billion and $21 billion in revenues

in fiscal 2020, accounting for 25% and 15% of total revenues, respectively. Walgreens fiscal 2016 sales were

bolstered by the consolidation of Alliance Boots numbers. However, of late, the UK business has been facing

pressure from online retailers, impacting the company’s international operations. This trend is expected to

continue in the near term. Below we discuss Walgreens’ business model, followed by sections that review past

performance and fiscal 2020 expectations for the company’s revenue drivers. You can look at our interactive

dashboard analysis ~ WBA Revenues: How Does Walgreens Boots Alliance Make Money? ~ for more details.

Walgreens Generates Its Revenue Primarily From Its Retail Pharmacy Sales. Its Largest Segment In Terms of

Revenues Is Pharmacy, Which Accounted For Roughly 60% of Total Revenues In Fiscal 2019.

Revenue Contribution As of Fiscal 2019:

Pharmacy  ~ 59.4%

Retail ~ 25.3%

Pharmaceuticals Wholesale ~ 15.3%

Walgreens’ Business Model

What Need Does It Serve?

Walgreens operates a network of around 14,000 retail pharmacy stores globally, and it sells pharmacy and retail

consumer healthcare products. We have divided the company’s sales in three segments ~ Pharmacy, Retail, and

Pharmaceuticals Wholesale.

Pharmacy includes the sale of prescription drugs and provision of pharmacy-related services in the U.S. and

international markets.

Retail includes the sale of healthcare and retail products, including non-prescription drugs, beauty, toiletries, and

general merchandise.

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

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States.

Who Pays To Walgreens?

Walgreens 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. Its clientele primarily

consists of:

Retail Consumers

Pharmacies

Doctors

Hospitals

Health Care Centers

What Are The Alternatives?

Walgreens’ business model faces stiff challenges and competition from offerings by its global competitors such

as:

CVS Health

Wal-Mart Pharmacy

Medco Health Solutions

ICORE HealthCare

Walgreens’ Total Revenue Grew 32% Between Fiscal 2015 And Fiscal 2019

Walgreens’ total revenue grew from $103 billion in fiscal 2015 to $137 billion in fiscal 2019.

This growth was largely led by its pharmacy segment, which saw 43% growth in sales over the same period. This

was driven by increase in number of stores.

The growth in fiscal 2016 can be attributed to full consolidation of Alliance Boots results of operations, primarily

impacting the Pharmaceuticals Wholesale business.

As we look forward, the revenue growth rate could see a slowdown, amid pressure on international sales, primarily

U.K., where the sales are impacted by stiff competition from online specialists.

Revenue Will Likely See Low Single-Digit Growth In Fiscal 2020, As International Pharmacy And Retail Sales Could

Partly Offset Growth In The U.S.

Walgreens’ Pharmacy sales grew from $57 billion in fiscal 2015 to $81 billion in 2018, and it could grow to $84

billion by fiscal 2020, led by expansion of networks. The company added over 1,200 stores between fiscal 2015

and fiscal 2019.

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Retail segment, which includes the company’s retail sales of prescription drugs, and consumer healthcare

products, saw sales grow slightly from $33 billion in fiscal 2015 to $35 billion in fiscal 2019, and it will likely hover

around the same mark in the near term, as the company could close some of its stores in U.K., amid increased

competition from online specialists.

Pharmaceuticals Wholesale segment sales grew from $14 billion in fiscal 2015 to $21 billion in fiscal 2019, and it

could hover around the same mark in fiscal 2020.

Note that the revenue below are adjusted for eliminations.

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Subject: Drug stores; Pharmacy; Pharmaceuticals; Prescription drugs; Business models

Location: United States--US United Kingdom--UK

Company / organization: Name: Alliance Boots; NAICS: 446110; Name: Walgreens Boots Alliance Inc; NAICS:

446110; Name: Walmart Inc; NAICS: 452112, 452311, 454110; Name: Medco Health

Solutions Inc; NAICS: 446110, 524292; Name: Walgreen Co; NAICS: 446110; Name:

New York Stock Exchange--NYSE; NAICS: 523210; Name: CVS Health; NAICS: 446110

URL: https://www.trefis.com/stock/wba/articles/479888/what-are-walgreens-key-

sources-of-revenue/2019-12-31

Publication title: Newstex Finance &Accounting Blogs; Chatham

Publication year: 2019

Publication date: Dec 31, 2019

Dateline: Dec 31, 2019

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Last updated: 2019-12-31

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