In a notable fiscal first-quarter report released on Friday, Walgreens showcased a mixture of resilience and ongoing challenges as it navigates through a transformative period. For the three-month duration concluding on November 30, Walgreens exceeded analysts’ expectations with adjusted earnings per share (EPS) of 51 cents, significantly above the anticipated 37 cents. Revenue for this period reached $39.46 billion, surpassing predictions of $37.36 billion according to data from LSEG. Following the release of these figures, Walgreens’ shares rose sharply by approximately 10% in premarket trading, reflecting investor optimism amid the company’s ongoing restructuring efforts.
Despite these encouraging results, Walgreens opted to maintain its fiscal 2025 adjusted earnings forecast at a range between $1.40 and $1.80 per share. Insider insights indicate that the company chose not to provide an annual sales guidance during this earnings release, after previously projecting revenue between $147 billion and $151 billion earlier in October.
However, beneath this facade of growth lies a stark reality. Walgreens reported a net loss of $265 million, equating to 31 cents per share, in contrast to a loss of $67 million or 8 cents per share from the previous year. This substantial increase in losses was primarily attributed to elevated operating costs and the execution of a multi-year strategy to shutter underperforming stores. The company plans to cut down approximately 1,200 locations over the next three years, with 500 stores set to close in the current fiscal year alone. Currently, Walgreens operates around 8,500 retail pharmacy locations across the United States.
CEO Tim Wentworth addressed the complexities facing the company, stating that while the turnaround will take time, progress is being made. He emphasized the importance of stabilizing the retail pharmacy sector by optimizing physical footprints, managing operating expenses, and enhancing cash flows while tackling ongoing reimbursement issues.
Walgreens reported growth across its three primary business segments during the fiscal first quarter. The U.S. retail pharmacy division, which is the backbone of the company’s operations, generated impressive sales of $30.87 billion— a 6.6% increase from the prior year’s $28.96 billion. This exceeded analysts’ expectations, which had forecasted sales of $29.21 billion for the same period.
Pharmacy sales specifically saw an increase of 10.4%, driven by rising prescription prices and inflation in brand medications. Moreover, total prescriptions filled, including vaccines, amounted to 316.3 million, reflecting a modest 1.5% year-over-year improvement. However, not all categories performed equally; retail sales declined by 6.2%, attributed largely to a sluggish cough, cold, and flu season, alongside diminished sales in discretionary categories.
On the bright side, Walgreens’ healthcare segment demonstrated robust growth. Sales surged to $2.17 billion, with an impressive 12% increase year-over-year, surpassing expectations of $2.09 billion. Growth in this vertical can be partly credited to advancements in the company’s primary care services provided through VillageMD and the specialty pharmacy division, Shields Health Solutions.
Expanding its scope beyond domestic operations, Walgreens reported its international unit, encompassing over 3,000 retail locations worldwide, generated $6.43 billion in sales, representing a 10.2% increase over the previous year. The Boots chain in the UK contributed to this growth with a 4.5% increase in sales, outpacing analysts’ predictions of $5.85 billion for the region.
Looking ahead, the future remains uncertain yet promising for Walgreens. The company is in discussions with private equity firm Sycamore Partners regarding a potential sale, reflecting possible strategic pivot points as it seeks to reestablish its footing within a rapidly evolving market. The retail pharmacy landscape continues to face pressure from various angles, including pharmacy reimbursement policies, shifts in consumer spending, and competitive challenges.
As Walgreens continues its multi-faceted approach to restructuring, stakeholders will be watching closely to see if these initiatives will yield sustainable growth and profitability in the long term. The outcomes of these changes will be critical not only for the company’s financial health but also for its position in the broader healthcare ecosystem, making it an exciting and pivotal moment for one of America’s foremost pharmacy chains.