A class action lawsuit was filed against Walgreens Boots Alliance (WBA) by Levi & Korsinsky on July 12, 2024. The plaintiffs (shareholders) alleged that they bought WBA stock at artificially inflated prices between October 12, 2023 and June 26, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Walgreens Boots Alliance stock during that period can click here to learn about joining the lawsuit.
Walgreens Boots operates a chain of retail pharmacy stores under the banner Walgreens in the U.S. and Boots in the UK. The overall healthcare industry is under pressure due to weak consumer sentiment and macroeconomic uncertainty. WBA is also facing margin pressures and declining net income, which resulted in a lowering of the full-year outlook in June.
Walgreens Boots’ Misleading Claims
According to the lawsuit, WBA and three of its senior officers (Individual Defendants) repeatedly made false and misleading public statements throughout the Class Period. Particularly, they are accused of omitting truthful information about the company’s Pharmacy division from SEC filings and related material.
For reference, during the earnings call on January 4, 2024, the CEO pointed out that the company was maintaining the full-year adjusted EPS (earnings per share) guidance despite the current headwinds. He mentioned inflationary pressure on consumers, diminishing savings, and weak pharmacy script volumes as some of the factors affecting the business.
Furthermore, on March 28, 2024, the CEO and CFO highlighted the strong outperformance of the Pharmacy Services segment, aided by the vaccine portfolio.
To summarize, WBA constantly maintained throughout the Class Period that its Pharmacy Services business was performing well despite the challenges. The company failed to disclose the actual and potential impact of the current headwinds on its segments and overall business.
Plaintiffs’ Arguments
The plaintiffs maintain that Walgreens Boots Alliance and the Defendants deceived investors by lying and withholding important information about the company’s business prospects during the Class Period. Importantly, the Defendants are accused of misleading investors about the impact of the headwinds on the U.S. Retail Pharmacy segment.
The information became clear on June 27, 2024, when the company released the Q3 FY24 results. WBA reported mixed results, with revenues beating expectations but EPS missing estimates. The company even cut its Q4 and full-year revenue guidance, citing significant challenges in the U.S. Retail Pharmacy business due to a “worse-than-expected consumer environment and challenging pharmacy industry trends.”
Unfortunately, the news led to analysts’ rating downgrades on the stock and share price decline. On June 27, WBA shares collapsed by 22.2%. To conclude, Walgreens Boots Alliance failed to appropriately inform shareholders about the potential weakness in the U.S. Pharmacy segment and related business losses. Owing to all these reasons, WBA shares have lost 57.9% of their value so far in 2024.
