Walgreens plays down Amazon pharmacy entry, but investors spooked

By Manas Mishra

(Reuters) - Walgreens Boots Alliance Inc's chief executive officer said on Thursday he was not worried about Amazon.Com Inc's push into the U.S. healthcare sector, but investors were rattled by the threat the online giant could pose to the sector.

Walgreens' shares fell as much as 11 percent, overshadowing the company's better-than-expected quarterly results and a $10 billion buyback, amid a broad selloff among drug retailers and wholesalers after Amazon said it would buy online pharmacy PillPack.

"You see, the pharmacy world is much more complex than just delivering certain pills or certain packages," CEO Stefano Pessina said on a post-earnings call that was dominated by discussions around Amazon's foray.

"We are not particularly worried," Pessina said, but added that the company was not complacent either.

In its first earnings report as a member of the bluechip Dow Jones Industrial Average, Walgreens posted a 19.3 percent rise in U.S. pharmacies sales due to higher prescription volumes at Rite Aid stores.

Walgreens bought some of Rite Aid Corp's U.S. stores last year after scrapping its deal to buy the smaller rival outright.

However, the retail segment continued to be a drag on its results, with same-store sales in the business falling 3.8 percent.

"CVS and Walgreens have become particularly reliant on the pharmacy side to drive their businesses forward," said Neil Saunders, managing director of GlobalData Retail, calling it a "folly" to not invest in retail.

"This now means that the retail side of the business is largely incapable of driving footfall into stores which could help support the prescription and pharmacy side of the business."

Walgreens said same-store sales at its U.S. pharmacies were unchanged in the quarter. The average expectation was for a 3.7 percent rise, according to eight analysts polled by Thomson Reuters I/B/E/S.

Excluding items, the company earned $1.53 per share, beating analysts' expectations of $1.48.

The company's total sales rose 14 percent to $34.33 billion, edging past the average analyst estimate of $34.05 billion.

Walgreens also authorized a $10 billion share buyback and increased its quarterly dividend by 10 percent to 44 cents per share.

(Reporting by Manas Mishra in Bengaluru; Editing by Maju Samuel)