Walgreens’ (WBA) quarterly results are the latest sign that American consumers are increasingly under pressure.
Shares of Walgreens Boots Alliance fell 24% on Thursday after the pharmacy chain cut its full-year guidance due to challenging pharmacy industry trends and a “worse-than-expected” consumer environment, with management reporting a “continued pullback” in discretionary expenses cited. .
“In the U.S. retail pharmacy space, we are seeing continued pressure on the American consumer as our customers become increasingly selective and price-sensitive in their purchases,” CEO Tim Wentworth told analysts on the company’s earnings call Thursday morning.
The company is the latest retailer to call for a more cautious consumer in an environment of persistently stubborn inflation and high interest rates. The pharmacy chain’s quarterly report comes as the Federal Reserve considers when and how quickly to cut interest rates. Any cracks in the economy could prompt the central bank to take action sooner or later. The most recent prediction was that there would be one cut this year.
Walgreens expects this year’s adjusted earnings per share to be between $2.80 and $2.95, compared to its previous forecast of $3.20 to $3.35.
A challenging consumer environment has prompted Walgreens to reduce prices in its health and wellness, personal care and seasonal categories.
Jeff Jonas, portfolio manager at Gabelli Funds, told Yahoo Finance that he expects other pharmacy companies like CVS ( CVS ) to face similar consumer headwinds.
“Due to the higher prices at the pharmacy, consumers no longer pay this. They go to Amazon, they go to Costco or Walmart. So that forces the pharmacies to lower prices on many of these fronts [of] retail items, which directly hurts profit margins.”
Retail sales data for May showed the pace of consumer spending slowed from last year, a sign that high interest rates and inflation are weighing on consumers.
Last month, Home Depot’s CEO indicated that the home improvement store’s results were “impacted by a delayed start to spring and continued weakness in certain larger discretionary projects.”
Also in May, shares of Starbucks (SBUX) fell nearly 16% in a single session after the coffee giant missed its quarterly results, with U.S. same-store sales falling 3% compared with Wall Street expectations for a gain of just over 2%.
Straight-laced consumers have also become more discerning in supermarket chains, recently leading to weaker expectations for the current quarter from meat giant Tyson Foods (TSN).
On Thursday, investors will look for other clues about how consumers are holding up in Nike’s (NKE) scheduled fourth-quarter earnings after the bell.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X @ines_ferre.
