Pharmacy Costs Eat Into Walgreen Gross Profit Margins

Profits and sales were higher at Walgreens this quarter, but its earnings report still failed to impress Wall Street. That shortfall between what was delivered and what was expected came down to a gross profit margin squeeze in its pharmacy business as generic drug costs increased and reimbursement rates dropped. Those trends have also been affecting fellow drug retailer Rite Aid. Also hurting shares, the company withdrew its previous 2016 guidance, as moves towards finalizing its acquisition of Alliance Boots clouded visibility. Management expects to issue updated fiscal goals late July, early August.