On Friday, Walgreens Boots Alliance reported its fiscal first-quarter earnings that exceeded analysts’ forecasts. The financial results, released for the three-month period ending November 30, indicated a gradual recovery as the company takes strategic measures to navigate through a tumultuous year. Analysts surveyed by LSEG had projected earnings per share (EPS) of 37 cents; however, Walgreens delivered an adjusted EPS of 51 cents. Revenue also surged past expectations, reaching $39.46 billion compared to the expected $37.36 billion. Despite these promising indicators, Walgreens is cautious, maintaining its adjusted earnings guidance for fiscal 2025 at $1.40 to $1.80 per share, while opting out of an annual sales forecast for now.
In response to the better-than-expected earnings report, Walgreens’ stock saw a significant boost in premarket trading, marking an approximate 10% increase. This initial surge signals a positive sentiment from investors toward the company’s efforts to stabilize and turn around its business amid ongoing challenges. The recent upswing can be interpreted as a hopeful sign that Walgreens’ strategic closures and cost-cutting measures will ultimately yield a more favorable financial outlook.
However, Walgreens’ path has not been without hurdles. The previous fiscal year dealt the company several setbacks, including pressure from pharmacy reimbursements, diminished consumer spending, and complications associated with expanding into primary care services. Furthermore, as Walgreens implements a multiyear plan to close around 1,200 underperforming stores—500 of which are slated for closure in fiscal 2025—it recorded a net loss of $265 million for the quarter. Comparatively, this marked a stark incline from the $67 million loss reported in the same quarter the previous year, primarily attributed to these restructuring efforts.
Breaking down the financial performance, Walgreens’ three business divisions all demonstrated growth during the fiscal first quarter. The U.S. retail pharmacy segment generated sales totaling $30.87 billion, a 6.6% increase from last year’s quarter. Analysts had anticipated only $29.21 billion for this sector, indicating a clear outperforming of market expectations. Prescription sales surged by 10.4%, with comparable sales advancing by 12.7%. This uptick in pharmacy performance can be partly credited to inflation in brand medication prices, clearly demonstrating the segment’s resilience despite external pressures.
In stark contrast, Walgreens did experience a decline in retail sales, which dropped by 6.2% from the previous year’s quarter. The company attributed this downturn to a lack of demand, particularly in discretionary products, alongside a milder cold and flu season that typically drives sales in over-the-counter medication.
Noteworthy is the performance of Walgreens’ U.S. healthcare unit, which saw a sharp increase in sales, reaching $2.17 billion—a 12% rise compared to the same period last year. Analysts had projected lower figures, expecting around $2.09 billion. This segment’s growth can be partially traced to the expansion of primary care provider VillageMD and specialty pharmacy firm Shields Health Solutions. Specialty pharmacies often manage complex disease medications, indicating a diversification in Walgreens’ healthcare offerings that could aid in its recovery strategy.
The international division also showed formidable results, with revenues of $6.43 billion, reflecting a 10.2% year-over-year increase. This performance outshone analyst predictions, suggesting a revenue expectation of around $5.85 billion for this segment. Significantly, the U.K.-based Boots drugstore chain contributed to this positive outcome, reporting a 4.5% sales increase, which might signify broader acceptance and demand for Walgreens’ product offerings abroad.
Despite the losses and operational challenges, CEO Tim Wentworth expressed confidence in the company’s turn-around trajectory, attributing recent financial successes to a disciplined approach toward its 2025 priorities. He emphasized the importance of optimizing the company’s pharmacy footprint, managing operating costs, driving cash flow improvements, and tackling reimbursement issues. As Walgreens continues to redefine its operational model, stakeholders will be keenly observing the company’s strategy and adapting to evolving market factors.
While Walgreens faces a series of complex challenges, the recent earnings report suggests a path forward. The combined analysis of increased sales in key segments and an optimistic outlook underscores the potential for a successful recovery in the near future.