The Walgreens Boots Alliance, or WBA, is having a pretty bad time with the stock market. After all, their stock trades are the lowest that they’ve been in about six years. Their sales are dropping, and so are their earnings. Some might think the recent decision to raise tobacco buying age to 21 might help contribute to this poor performance, but the truth is that such a decision is only a result of the real problem Walgreens has.
Truth is, cigarettes and tobacco aren’t a very high part of Walgreens’ profit margins, and their decision to up the age of purchase by three years doesn’t really mean much of anything for their bottom line. The real problem is that they execute the change poorly, as they do with most of the decisions they’ve been making over the past couple of years. Buying Walgreens stock is actually quite inexpensive, but it’s still a bad investment as long as these types of execution failures still exist.
To start, the reason Walgreens even made this change in policy is because the FDA was demanding it of them. After all, according to the FDA, Walgreens is the top violator in regards to tobacco sales violation. About twenty percent of their locations are actually making illegal sales. On top of that, Walgreens is the leading seller of tobacco in the U.S. Most other pharmacies have either cut tobacco out of their sales entirely. Fact of the matter is, making a blanket policy change to alter tobacco sales, rather than just dealing with the legal issues is a poor sign of Walgreens’ ability to deal with problems they’re having. It’s just not a great solution for the problem at hand.
Most of the pharmacies have already dealt with the legal issues of tobacco sale, and yet their stocks actually increased rather than dropping. The reason why this is happening is probably just to poor execution or direction. Either way, while Walgreens probably won’t disappear from the economy over something like this, the direction that its stocks and sales are going doesn’t bode well for the future. Maybe they’ll be able to turn it around, but at the rate they’re going something like that won’t happen without change. Either way, it probably isn’t a good idea to buy any stocks in Walgreens until things change.