Ladies and gentlemen, thank you for standing by, and welcome to the Walgreens Boots Alliance, Inc. Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session Please be advised that today’s conference is being recorded.

Good morning, ladies and gentlemen, and welcome to our earnings call for the second quarter of fiscal year 2021. On the call with me today are Roz Brewer, the Chief Executive Officer of Walgreens Boots Alliance; James Kehoe, our Global Chief Financial Officer; Alex Gourlay; Co-Chief Operating Officer of Walgreens Boots Alliance; and our former CEO, Stefano Pessina is also there for any relevant questions this quarter as he transitions fully to the Executive Chairman Role. Before I hand you over to Roz to make some opening comments, I will, as usual, take you through the legal Safe Harbor and cautionary declarations. Certain statements and projections of future results made in this presentation constitute forward-looking statements that are based on our current market, competitive and regulatory expectations, and are subject to risks and uncertainties that could cause actual results to vary materially. We undertake no obligation to update publicly any forward-looking statement after this presentation, whether as a result of new information, future events, changes in assumptions or otherwise. Please see our latest Form 10-K and 10-Q for a discussion of risk factors as they relate to forward-looking statements and note in particular, that these forward-looking statements may be affected by risks relating to the spread and impact of the COVID pandemic. In today's presentation, we will use certain non-GAAP financial measures. We refer you to the appendix in the presentation materials available on our Investor Relations website for reconciliations to the most directly comparable GAAP financial measures and related information. In addition to our earnings announcement, this morning we have issued an 8-K providing a recast of our historical financial statements to reflect the pending disposition of our Alliance Healthcare business as well as our new reportable operating segments. Please be aware that we may during this presentation and answers to questions make reference to the information contained in that 8-K. You will find a link to the webcast on our Investor Relations website at investor.walgreensbootsalliance.com. The earnings announcement, the presentation materials from this call, and the 8-K are all available on the website. After this call, the presentation and webcast will be archived on the website for 12 months.

Thank you, Gerald. I wanted again by saying how glad I am to be joining you today for my first earnings call since starting at Walgreens Boots Alliance. After two and a half weeks on the job, I am optimistic about the future of our company and our ability to drive sustainable long-term value for our shareholders. I expected this opportunity because of the vast potential that lies ahead for WBA and my initial impression to being confirmed even more after spending some early days in the business. During this time I've met incredible leaders, partners and customers and I've been briefed in depth on some of our core initiatives, including our vaccine rollout. I have also gained a greater understanding of our operations by visiting some of our stores and specialty pharmacies. What I've learned already is that we have many incredibly passionate and talented team members who are deeply motivated by our purpose to help people across the world lead healthier and happier lives and I definitely share their passion. It is truly remarkable how WBA is uniquely positioned with our wide global reach and unmatched expertise to be a force for good in the lives of millions of people every day. Of course, nothing demonstrates our impact more than the leadership we have shown during the pandemic by ensuring personal protective equipment is on shelves, by keeping our doors open to continue providing vital medications, by setting up mobile units in neighborhoods without pharmacy access, by launching new pickup and delivery options, by rolling out extensive testing and vaccination programs in record time. We've played a vital role in the health and wellness of our communities like never before. We now have to take some of the lessons that we've learned in the last year and build on them. When faced with the terrible deadly virus it is obvious the team moved quickly, fought more creatively and worked together more closely and with great collaboration. This shared experience allowed the team to appreciate what WBA provides to its customers and patients even more profoundly. And these insights need to continue to propel us forward along with divisive leadership and clear strategic direction. As a team we will be intensely focused on accelerating our growth and filling a culture of agility, establishing new healthcare solutions, and building best-in-class consumer engagement across all of WBA. Outpatients and customers have deep loyalty and trust in our brands and we need to continue to find ways that we can serve and reach them even better.

Thank you, Roz, and good morning. On the 6th of January, we announced the sale of the majority of our Alliance Healthcare business to AmerisourceBergen for $6.5 billion. With the announcement, the related assets, liabilities and operating results of the business to be divested have been reported as discontinued operations and are reflected as such in the second quarter of financial results. As a result of the transaction, the company has reorganized its continuing operations into two reporting segments, the United States and the International. The United States segment includes our Walgreens business and our AllianceRx Walgreens Prime joint venture iA will be consolidated within the U.S. segment and our equity earnings in AmerisourceBergen are also included within the segment. The International segment includes all of our operating businesses outside of the U.S. including share of our Boots UK, Republic of Ireland and Opticians, our retail pharmacy operations in Mexico, Chile, and Thailand, our franchising businesses and our wholesale JV in Germany. Please note that corporate overhead costs and costs associated with development of the Healthcare and Technology startup are reported separately outside the two operating segments. Please refer to our 8-K filing for further information.

Thank you, James. We’ve had another busy quarter as we continue to execute against our strategic priorities of modernizing our pharmacy business, transforming our retail operations and developing our digital capabilities. In responding to COVID-19, we have accelerated the evolution of our operations across United States, and Walgreens continues to play a key role on the front lines of the pandemic. I would personally like to thank each and every one of our associates who support our patients and customers in an extremely challenging environment. One thing has become crystal clear during the past year of the pandemic, the importance of the pharmacy providing healthcare in our community, both in federal locations and through our digital platforms is greater than ever and reinforces our belief in the strategic significance of the role of pharmacist on the Walgreens network. Working with federal and state governments we have accelerated our role in the fight against the pandemic. We've rapidly mobilized our operations to play our part in nationwide rollouts of the COVID vaccine program. By the quarter end our teams have administered approximately 4.1 million vaccines to patients in long-term care facilities, at mass vaccination sites, and in Walgreens pharmacies, and importantly, we've partnered with local officials to bring vaccine administration directly into local communities and to the most vulnerable populations. In March, we administered another 4 million vaccines taking the total over 8 million to date. By the time of the last earnings call, we had over 30,000 qualified healthcare associates ready to deploy to the vaccination program. This number is now over 59,000 with capacity to administer vaccines at 8000 locations across 49 states in DC and Puerto Rico. We're also partnering with Uber to address the problem of equal access to vaccines amongst vulnerable communities, ensuring that many more Americans are able to visit a vaccination location. We've also worked to improve accessibility to appointments and scheduling. Earlier this month we introduced COVID vaccination booking on the MyWalgreens app and we're partnering with Nuance to offer voice recognition as initial method of accessing appointments. We have undertaken more than 5 million COVID tests since the pandemic began last year and today we offer testing in 5,000 locations. We're working with partners to expand our testing solutions and we've launched a new business-to-business service called Test & Protect allowing employers to provide testing and vaccination services to their employees. Improving the efficiency of our pharmacies is our top priority, both to manage costs, but more importantly to free up pharmacist time, to provide valuable integrated healthcare services to our customers in the local community. As James mentioned earlier this year, we announced a majority stake in iA, a Company which brings automated pharmacy solutions and enhanced workflow capabilities to the Walgreens network, together with establishing our first local automated pharmacy microfilament center in Phoenix in April. This center prepares maintenance medications for qualifying patients in the area which are then delivered to their local Walgreens pharmacy or to home depending on the patient's preferred routes. We are now building out a second market in Dallas which we will start operating in the summer. As we create a more efficient pharmacy operation, in part due to the iA enabled automated local hub-and-spoke model, we have exciting plans to enable our pharmacists to play a key part in more integrated care models. We are on track to open 40 Village Medical at Walgreens locations by the end of the summer and we now have 14 locations up and running in Houston and Phoenix. As I said many times, by coordinating our pharmacists with primary care doctors, we create a more integrated and engaging patient experience and we believe this will help to lower the cost of care. Our VillageMD relationships go beyond their physical locations by also providing an integration of telehealth offerings. Further, on the digital healthcare front, our Find Care platform continues to grow accelerated by the pandemic. Find Care connects patients to telehealth providers, local healthcare services, benefits enrollment and healthcare educational tools. We are building our user base and increasing the number of providers accessible on the platform. The Find Care app has now reached a wide audience and is gaining traction. Visit traffic online and on the app was just below 70 million in the quarter. While much of this traffic was driven by COVID vaccination and testing enquiries, non-COVID related visits increased by 92% versus the prior quarter. We now have more than 45 providers on the platform, delivering over 65 services in 50 states, treating over a 120 conditions. Turning next to retail transformation. As you know, we launched our new loyalty program my Walgreens last November, providing all members with new loyalty benefits, customized products and services. Membership has grown from 40 million to approximately 56 million to date, which is a 41% increase versus the prior quarter. In the last month, mobile app usage was up 37% versus prior year. And most importantly, that app is resonating with our most valuable customers. Last month, MyWalgreens net promoter score was 41% higher than the score for Balance Rewards, our previous loyalty program. We are continuing to engage with our customers through our mass personalization strategy, which boosted retail sales by 30 basis points in the quarter, building on 100 basis points list in the second quarter of last year. As the pandemic progresses, we are really focused on giving our customers access to retail products, when and where they want them, through a combination of physical stores and digital platforms, with customers having a choice of store, home delivery, curbside or drive-thru pickup. These enhanced retail pickup options are contributing to strong digital growth. Since last November's launch, over 4 million pickup orders have been completed to date, driving an increase of 78% in digitally initiated retail sales in the quarter. We are now one of the most convenient and quickest omnichannel retail options available in the U.S. with pickup orders completed in just 20 minutes on average, from placing the order to having the product in your hand. We've also continued to expand our same day, last mile delivery capabilities by adding Instacart a nationwide partner in addition to the existing partnerships with Postmates and DoorDash. As we continue to redefine our core omnichannel convenience offerings, we are leveraging the data we generate from it, to determine which additional products and services our customers want, and identify new business models and alternative income streams. A great example of this is the development of our financial services offering which will be available later this summer. And yesterday we announced an agreement with InComm Payments, our leading global payments technology company to provide convenient and accessible financial services options for our customers. Together, we will launch a new bank account with a MasterCard, debit card that will serve Walgreens shoppers, both in-store and online and allow them to earn MyWalgreens cash rewards on all purchases. Overall, we are really pleased with the progress we've made on our pharmacy, retail, and digital priorities in the quarter, but I assure you this is just the beginning. Our assets are uniquely positioned in the local community and with our ever growing list of capabilities, we have the opportunity to expand and deepen our relationships with patients and customers. I'll now hand you back to Roz.

Thank you, Alex. As you've heard, a lot has been accomplished this quarter, and while operationally our performance has been impacted by COVID-19, overall we've had a good financial quarter and as a result, we've raised our full year EPS guidance. However, acknowledging that there is still work to be done to stabilize the base business. And on that note, I want to take this moment to thank Stefano Pessina for everything that he has done to bring WBA to the point where it is today with a foundation for future growth. I'm looking forward to working with this team and the entire board as we capitalize on the incredible opportunities in front of us. Again, you don't have to look any further than our response to the pandemic to understand what this company is truly capable of in the future. As just one example of that, we've already administered 8 million vaccinations in the U.S. in a few short months, many of them to essential workers such as healthcare professionals and teachers, as well as underserved in minority communities and we're poised to deliver millions more vaccinations in the days ahead. Another opportunity that we have is how we apply the funds from the sale of our Alliance Healthcare assets, which will allow us to reinvest in healthcare and further focus on our core businesses. I intend to move swiftly and decisively to lead WBA forward. And in order to do that, I'd begun a detailed review of our long range business plans across the company, as well as how we make investments and allocate capital. I'm taking a close look at where we should reinvest in our business, and how we drive financial returns. As you know, we also have a broad range of valuable equity investment across distribution, healthcare and pharmacy and I'm reviewing each of those to ensure they provide strategic benefit in addition to financial return, having been on board for only two and a half weeks, it's simply too early for me to discuss anything further at this point. But I do look forward to sharing my further perspective once I've had more time to study the company from the inside. I plan to meet with many of our shareholders in due time, and to communicate with you regularly and with transparency. There will be much more to discuss in later calls and meetings, but for now, I am energized to begin planning for the future and I'm very excited about the opportunities ahead. So with that, I will turn it over to the operator and open the call for your questions.

Your first question comes from Kevin Caliendo with UBS.

Hi thanks for taking my call. First, Roz congratulations in the new role and best of luck going forward. I really wanted to focus on the second half guidance. We're all trying to figure out sort of what is the jump off point for fiscal 22. And your vaccine number, the guidance in terms of the number of vaccines would imply a pretty big benefit given the $40 reimbursement rate. Yes, the second half guidance number was a little bit softer than I think where we are and where the street was, we didn't really have that big din. Are there any additional cars in the second half going forward if you can may be give us some explanation, through that or anything else that might be one time-ish in the second half of the year, where did - and then how to think about what the jump off point would be for fiscal '22 as we think about trying to grow and model beyond this fiscal year.

Yes, hi Kevin, James here. I'm not sure why you believe the second half is softer, because we've given a range today of 4% to 9%, that's mid-to-high and then 4%, that would be 26% growth and the 9% would be 39% growth. So that's the first point. Two is when we originally gave guidance at the start of the year, we said that we expected the second half to grow at 30% to 40%. So actually, we see our current guidance has been solidly within the guidance we gave more than six months ago, despite and I really want this one. And because you asked what's the one time in the second half and overall and you talk about the vaccine opportunity to 30 million compared to our original guidance. And this is six months ago and compared to three months ago COVID is actually negative. So you've probably put in the positive role vaccinations, but cough/cold/flu, and a series of full lockdowns in the U.K. And tight restrictions in the U.S. have all completely offset the vaccine opportunity. So actually, if we look at compared to your original guidance COVID net after the benefit of vaccinations is about $0.13 negative and some of that will continue into the third quarter. So if you look at the dynamics going forward, third quarter, the first one is we're still in a lockdown in the U.K. and retail will reopen. I think it's April 13. All the rest of the U.K. will be back for business some time mid June. So you could effectively say that half of the third quarter is significantly impacted in the UK. Look at the U.S. market itself. Right now cases are up the same level as they were last May 65,000 per, and while they’ve come down we're still somewhat concerned that some of the negative impact impacts will continue into Q3. So our view is, we've done exactly what we said we would do in the second half and we're absorbing on a full year basis about $0.13 negative. So I actually would say that the call up, to mid-to-high single digit is actually a stronger call up in the market would have been expected. But the key negative in the second half is just continued negative COVID cough/cold/flu, probably into mid April, and a lockdown in the UK into mid April. Beyond that, we started coming back really strongly, so we're loving, and negative prior year and we have the majority of the vaccination upside falls into the second half. So our most recent results in Q2, we had a $10 million benefit from vaccinations, not rounding. So, hope I have answered your question on this one.

No, that's been helpful. Thank you.

Next question comes from Steven Valiquette with Barclays.

Great, thanks. Good morning and let me offer my congrats to Roz as well. James, in your comments, this is a question kind of built on the first one a little bit, but you mentioned several factors leading to the increased EPS growth guidance for overall fiscal '21 is some related to the first half of the year, some related to the second half. But really from the overall list of upside drivers, it'd be difficult to rank order everything. But is there any additional color you can provide? Which single factor do you think is driving the greatest amount of EPS upside for the overall company in fiscal '21 versus your original expectations? Thanks.

Yes, it’s a great question. I'd start off with just repeating what I said last on COVID. Year-on-year net of the vaccination opportunity is actually a negative. So where we saw the two single biggest items, I think I would call out, firstly the UK, and I would call it out in terms of the ability to ramp up and defend our position particularly in beauty through our e-commerce assets in the UK. So we've consistently delivered record months and the first this quarter was up 105%, but the last two months of the quarter were up 180% year-on-year. So net, we're winning in beauty in the market in the UK and the competition has fallen off completely. The second thing in the UK is overhead control and the mitigation of COVID impacts. So I'll call out just a number I gave on the call, overheads are down 9% in the quarter in the International segment. Well, that includes the incorporation of the German joint venture. If you take out the call it M&A impact overheads in the segment, we're down 15% year-on-year. That is just dramatic and it's way ahead of what we thought the team could achieve when we started out. So I think there's massively, there's massively over achieved on overheads and then I think it is the e-commerce assets. And finally, Ireland and Opticians businesses are outperforming as well. So it's quite a collection of outperformance in the UK segment if you like. The second one is the U.S. segment. The big standout there are margins in January. We've had a fairly traumatic impact from cough/cold/flu and many of our competitors have spoken about the same. So cough, flu incidences are down by 40%, which is a massive number and that bleeds straight into the seasonal scripts down 400 basis points because of that, and on the front of store 350 basis points. But overall, if you peel away the margin zero on year, the U.S. segment has outperformed our expectations. So in the quarter, margins were down year-on-year in the U.S. by 75 basis points. That's much better than the historical performance. Retail margins were up 60 basis points. And that's been pretty consistent every quarter. And second one is pharmacy margins have come in better than we expected, largely due to savings out of the procurement organization on generics, but also reflecting some accelerating deflation of generics in the market. So we were very happy with margins in general in the U.S. business and that's where we saw the biggest area of outperformance. When you get to vaccinations, the next thing P&L as we look forward quite noting, but as you build your models, vaccinations will probably will be profit accretive, so we should have favorable margin outlook for the rest of the year across the U.S. business as well. So we're feeling good about margins in the U.S. that was outperformance and then the UK segment on e-commerce and overheads, three big factors.

Okay, that's very helpful, thanks.

Next question comes from Ann Hynes with Mizuho Securities.

Hi, good morning. Thank you and congratulations, Roz. So I have a question on the vaccine. I know this week there have been some discussions from the Biden Administration. Did they want to push more of the vaccine administration to retail settings? And I don't really think you changed your vaccine assumption in your guidance. So if this was the case, and retail settings got more allocation from the Federal Government, what do you think Walgreens ultimate capacity could be for vaccine administration? And maybe talk about any incremental costs about what happens next? Thanks.

Hi Ann, this is Alex here. Yes, we were encouraged by the announcements and the reason for it is really clear. We're getting the vaccine in people's arms across all pharmacies faster than other settings and I think we will highlight again, the power of the pharmacy network and the power of the pharmacist, particularly in this pandemic I think is, as many Federal said in the closing and opening comments. What you have to remember is, it means more pharmacies will be involved, first of all will be an increased number of pharmacies involved, including more of our pharmacies for sure. And secondly, the vaccine is coming a lot faster than original plans as well. So we've given a range, I think in James prepared remarks, we said between 24, between 26 and 34 a million shots and also range. And of course, depending on what we see, really in the weeks ahead, we'll be able to give a better internal guidance in terms of what we're seeing. So that's one of the key reasons for the range we've given, because of that factor. So again, that's where we are. We're ready. We are ready with -- people are ready, our networks are ready, our scheduler is ready and we are busy. We're very proud of the work we're doing here. And we continue also to follow the very important administration guidance of again vaccine in the underserved communities, and the vulnerable communities as well as again, we're doing with over and many other initiatives. So I think we are ready to maximize the opportunity, and really get these shots in people's arms as fast as we possibly can.

Yes, and then the forecast is predicated on around 13 million vaccinations. And the reason we have given are relatively wide ranges, the availability can swing on the downside, and on the upside and simplistically, we have to form an assumption. But the 30 million, this is higher than what we were thinking three months ago, so it has gone up probably from 25 to 30. But at the same time, the UK has gone into two additional months of lockdown and cough/cold/flu has continued to be worse than we expected. So we're fairly comfortable with the 30 million, but obviously it's entirely dependent on the supply we receive. We're ready to receive it, but all indications are we get there, but there's always some risk and volatility.

All right, thank you.

And maybe there's one additional comment, which I think picks up on the first question from Kevin, which is we're not guaranteed $40 yet for every vaccine. Obviously, the Medicare price is being set and we are working with our commercial partners to make sure that we understand what they are going to pay and I'm we're very hopeful that we'll get to that number for every vaccine, but that's not yet been fully confirmed either.

Next question comes from Eric Coldwell with Baird.

Hi, thanks. Good morning. Roz, we realize it's very much too early for you to provide any specifics on numbers. Our question is more philosophical in nature. I'm interested in your position on things like wages for low skilled positions, as many employers are practically moving towards a $15 minimum wage, the country appears headed in that direction. Also, your position on items like tobacco, which Walgreens has been deemphasizing for years, but hasn't fully exited. I guess in general, it's sort of an ESG topic on the importance of those kinds of initiatives to become a more ESG centric company. Thank you very much.

Eric, thanks for the question. And one of the things that I've been pleasantly surprised about is the work that's happening inside the company on the ESG initiatives. Particularly, let me talk a little bit about wage because there is a pathway here in terms of getting there over a period of time. In those states where it has been federally regulated, we have matched those numbers. We'll continue to do that and then over a period of time we'll apply wages across the U.S. The second question you asked was around tobacco and what's my early read on tobacco? This company is committed to health and wellness and I think everything we've learned from the pandemic that's going to be even more of a priority. We'll continue to look at tobacco, but that's one of those issues that's really too early for me to really opine upon, but we'll continue to look at things like that.

Next question comes from Charles Rhyee with Cowen.

Yes, thanks for taking the question and congratulations as well. Roz, maybe a question for you, obviously, you haven't been here that long, but digital seems to be a major focus for you. It seemed like that was a major focus for you at Starbucks. What do you think that can be for Walgreens in the future here and what do you think that might mean in terms of digital focus, as well as what that might result in for maybe a change in the physical store footprint for the company?

Yes, thanks for that question. I'm excited about the opportunity for the digital platform here at WBA. It was one of the pleasant surprises I received, as I dug into some of the numbers to learn that we had over 100 million loyalty members at this time. And the initial investments from this year that we've made will also enable us to accelerate in that area. I'm excited. It will be one of my priorities. As I look at the second half and going into FY '22. I think there's a lot of opportunity that we can see in this space just to monetize. First of all, increased traffic in our stores as we execute vaccines, and then how do we personalize what we're learning about our customers and new customers that are coming into the store. And then I actually, the 9000 stores that we have really gives us a great and I'm talking in the U.S. area right now, gives us an opportunity to have a very strong omnichannel. Also some of the work that we're doing around first party data set is really encouraging. I mean, I think we all know that if you can target and measure that standpoint, you can see anywhere from 50% to two times better than using third party data. So, there's just some really early signs here that there's more potential in this space and I think as we look forward, mass personalization is a growth opportunity for us, and I'm excited about it.

Thanks, if I could follow-up, anything from Starbucks that you've learned that you think is really applicable here?

Sure, one of the things that I've learned is that, a digital platform can't standalone. You have to have a human connection as well. And so as I've visited stores, I'm really impressed in terms of what our pharmacists can deliver in terms of creating really deep personal relationships with the customer base. I'm encouraged by the demeanor of our employees in front of store. So I think we've got a great opportunity here, just as Starbucks did to combine a human connection with a digital connection.

Thank you.

Next question comes from Eric Percher with Nephron Research.

Thank you. I’ve a question for James on capital deployment. So as we progress through the year, we've now moved the sold operations to discontinued ops, but I recall that part of the initial discussion was that you will focus on offsetting dilution with the $6 billion putting some of that to work. So I'd love to hear your perspective on debt reduction or share repurchase and how that may play in as we get to the end of the year and the sale is completed.

Yes, I think what we've said already is, we are required to use about $2.5 billion of the $6 billion to pay down debt and that's basically to keep the credit metrics where they need to be because we want to retain BBB. What we have said is that we're not going to pursue share buybacks in the short term. So the concentration will be on building out in healthcare opportunities when that could be around pharmacy. And we know the recent examples have been the acceleration of VillageMD. The second one has been in iA and that's kind of interesting because it's in the sweet space of the automation of the pharmacy and driving maintenance scripts in that fulfillment centers over time. And this will free up the pharmacist to work on higher value activities within the stores, and drive better healthcare outcomes and increase our relevance overall in the market. So that's the piece that's not exclusively on the new healthcare. It's also on how do you turn the pharmacy business into the most efficient operator in the U.S., and that's what goes and free up pharmacist's time to work on other outcomes. And then the second part is, how do we build out a difference more in -- and very innovative technology based consumer centric healthcare business? And that's what we will become ambassadors later this year, displaying and showcasing what's developed to date, what is the of the date and effectively launch the entity and that I think will be very exciting. It's premature to get into much of that, but we did say in the comments that we have a tech platform in deep development right now. We also are forming a team. We're also setting KPIs longer term for the business, and a lot of stuff to get done, but it's very, very exciting. And I think as Roz comes on board and gets comfortable with it we will bring the -- we will launch this more extensively. And so I would expect that all of the remaining $3.5 billion is mostly acquisitions and if we don't come across attractive targets we would consider maybe in a year's time, we would deploy some to share repurchases, don’t know yet.

Thank you.

Next question comes from Ricky Goldwasser with Morgan Stanley.

Yes, hi, good morning and Roz, congratulations. I'm very excited and happy to see yet another female CEO join the healthcare group, so welcome. My question goes back to your comments around sort of the brick-and-mortar strategy and sort of that combination of the human factor with digital. The physical footprint has been top of mind for investors, especially when we think about sort of the new change or how consumers are accessing healthcare post the pandemic. So is any of the thought or is one of the things that you're looking at? Are you also looking at sort of what is the ideal number of brick-and-mortar stores versus digital storefronts or do you think that sort of that 9000 footprint is the right footprint or right base and then build a digital strategy around it?

So I'm going to turn this question over to Alex, but before that, I will just remind the group that it's a combination of both. And when I look at the 9,100 stores in the U.S., they're in some of the most significant zip codes that they can be in. Right? It's a wide distribution and that I think is attractive. Now, do we have too many or could we create more? This will come together in a broader strategy. But Alex, why don't you take it and talk a little bit about store positions in the U.S.?

Sure. Thanks, Roz and hi Ricky. Yes, I think I said before, at the moment we're comfortable with the number of stores we have in the U.S., and what we're doing is redesigning what we actually do in the communities we serve. I think the pandemic report has really helped to illustrate the point of how important they are, who would have thought that we would be doing testing in now 5,000 locations in Walgreens, who would have thought that the number of vaccinations we're doing across America is so big. And these are just two examples of many other things. There'll be no due with a service inside the company. The FedEx example from a couple of years ago was doing extremely well with pickup and also got financial services coming in quite a different way through MyWalgreens. So we continue to be very confident that we have the all the best corners, we continue to understand how to provide different services, products and services for them. I think, as Roz said so clearly, they are local, they are very human and they service communities in a very specific healthcare way. And our job over the period ahead is to use the data of analytics. And the new IT platforms are putting in place to provide even better solutions and services, particularly in health and wellness and also in terms of ethical positions. So again, more the common space, though we continue to be confident in our footprint across America.

Yes and just one thing to add, we have a fair amount of flexibility in how we manage the footprint, because as we've said before, we have about 2,900 stores coming off lease in the next five years. So our issue is not necessarily footprint, that sometimes we're overpaying for the locations compared to the value in the market and we will aggressively tackle that as part of the Transformational Cost Management Program. As each lease comes up, we will be entering into negotiations as to whether these are the right locations and the most cost effective ones. But the good news now is, we're coming into a phase for 400 to 500 stores turnover every year on a natural basis giving us an opportunity to resize the cost structure of the store as opposed to change the store itself.

Yes.

Thank you, very helpful.

Next question comes from George Hill with Deutsche Bank.

Good morning. First, let me echo the welcome aboard for you Roz. And then I'll -- these are sure I'm going to load them up. It's kind of a couple of short questions that are all largely housekeeping. So James on the 26 million to 34 million vaccinations, is that inoculations or injections? I'm trying to figure out is that the one-shot or the two-shot count? And then following that, is there anything we can pull out from March quarter results to increase the confidence in the guidance range or should we really think of it as all just, the ramp up of the vaccine and the increase in the reimbursement rate? Thank you.

No, it's shot, it’s 30 million shots. I'm not sure I got the last piece of your question. Maybe could you give it to me again?

Sure. I'm sorry. And I was just, is there anything that you saw in the March quarter or in the month of March or kind of what I would call quarter-to-date for fiscal third that causes the company to increase the confidence in the guidance range or is it really just largely the vaccine and the increase in the economics from the vaccine? I'm just wondering if there's anything else going on, you guys could call out?

No, I don't think March necessarily impacts it. It's still the same factors we said before. We're calling up the full year of guidance on the basis of the Bs in the first half and better visibility in the second half, a lot of it coming from the U.K., but also pharmacy margins and retail margins in the U.S. That's the main reason for the Bs. I think what we're seeing in March is, as we said, cough/cold/flu continues. The U.K is in lockdown. We are seeing them and maybe Alex can add in here, we are seeing some more buoyant foot traffic numbers comes back in the last two weeks. But it's extremely hard to read March because last year it was all over the place, each day was very, very different. So we got to be careful in how we interpret, but nothing we see in March gives us any cause whatsoever for concern on the guidance we're giving today.

Yes, George, I think we're seeing a return to beauty which is as expected, not beyond what we expected. And other category, photographic also doing better as well as people we think about travel. So these are coming back in line to what we had expected, not beyond. It is still encouraging to see that given the impact we had, when the pandemic started early days in 2020 but nothing beyond that, yes.

Thank you.

Next question comes from Glen Santangelo with Guggenheim.

Yes, thanks for taking my question. Roz, I appreciate that you've only been on board for a couple of weeks, but maybe I could ask you a high level question. Putting all the near term transient headwinds and tailwinds aside for a second, longer term investors, they seem to be very focused on the competitive landscape in the pharmacy business, consistent reimbursement pressure that thread off, e-commerce on both the pharmacy side and the front end and sort given you a back perspective and so I’d be – and how you view the competitive landscape and how that may evolve over the coming years in the roll of Walgreens within that competitive landscape. Thanks.

Yes, that’s a very good question, Glen I appreciated and it’s one of the things that I’m sort of talking by know then too as well to understand, what is our best viable position and how do we remain competitive and ahead and I’m encourage though by the early investments in this year that the company is made, seeing that we have investments in areas like iA to really work with our pharmacists to get them to have an easier job every day, it's those kinds of investments to give me encouragements secondly the work they were doing with VillageMD, to diversify who we are as not only a retail company or a pharmacy company, but to look at healthcare overall. This is a complex marketplace. I think we're all clear about that, but defining our key differentiator is the work that we have ahead of us. But these early innings that we're in right now, I'm highly encouraged by, and so I think there is a way for WBA to diversify itself. It has great beginnings, good bones to it, really good partnerships and I'm encouraged that will define that position. And really, as James said, we'll come back to you to talk about this tech-enabled platform that the company has been embarking upon. Many of you might know it is Horizon 3. And so we are looking at those things that can differentiate us, and we'll come back to you on that.

Thank you.

Next question comes from Brian Tanquilut with Jefferies.

Hi, good morning and Roz, congratulations again. I guess my question is for Alex, so you called out market share losses as a headwind for the quarter. And, I think Roz mentioned, focuses on stabilizing the base business. So what are you guys thinking in terms of strategy near term initiatives to arrest that? And then I guess my follow up is just on pricing, you called out pricing pressure as well and if I recall, last quarter, we were kind of under the impression that pricing was starting to stabilize in the pharmacy side. So has this reemerged this quarter and how should we be thinking about that going forward? Thank you.

Hi, thanks, Brian. On the pharmacy market share first of all, the trend is pretty consistent through the pandemic. What made the 30 basis points a little bit stronger than the previous quarter and previous quarter it was 20 loss really was, we think, a couple of weeks of really bad weather, we have a lot of stores in Texas, I mean all were closed caused for all or part of that last two weeks and we're comfortable with what we're seeing in March. So we think that we are a steady state with retail pharmacy. Med DC was solid as expected. We've lost a bit more in Medicaid. But we knew that was coming as one of our key competitors to be honest that continues to move volume into manage Medicaid. So I think we're and commercial will grow and as we expect, so we're pretty solid there on terms of trends, pricing although more as we get into the Medicare season, which is just about to start for 2022 and of course we don't disclose when the commercial contracts are see more of that as the year progresses. So there's nothing new to speak about in pricing. On the retail side, we're feeling good to be honest. I think James has said this, Roz has said this, we have made good progress with MyWalgreens, which is really the way of giving more value to the front end customer and tying them into the whole Walgreens experience. The NPS score is significantly higher as I said than the old listed program, we just started to be honest to be honest to use first party data as Roz also said. So I think we got, we're really feeling very good about the work we've done in the last period to really create more retention for our front end customers. But, this is our changing marketplace. We've got to win back customers from the grocers, the online marketplace continued to grow independently, so our omnichannel strategy is going to be really important here as well. And but the early innings of that, and we're going to keep on pushing very hard here and accelerate the change.

Awesome, thank you.

Thank you. That's all we have time for operator today. Thank you all for your questions. For those that we didn't get to, I'm sorry, we will reach out to you after the call. I would just reiterate the point that Roz made in her comments. We have had a lot of requests to speak to her. She's very aware of those, but she does need to take some time to understand the business and get her feet under the desk before she can do that. After that she has assured me she is committed to get out and see as many as she can. So we'll look forward to that and we'll speak to you again in three months time. Thank you very much indeed.

This concludes today's conference call. You may now disconnect.