The retail pharmacy landscape has been tumultuous, and Walgreens has faced its share of challenges in recent years. However, the company’s recent fiscal first-quarter results suggest a potential turn of fortune as it maneuvers through a tough economic environment. With a strategic focus on cost-cutting, store closures, and operational efficiency, Walgreens is making strides that could lead it toward recovery and sustainable profitability.
For the three-month period ending November 30, Walgreens impressed analysts with its financial performance, reporting an adjusted earnings per share (EPS) of 51 cents against expectations of 37 cents. Moreover, the company posted revenues of $39.46 billion, exceeding the prognostications of $37.36 billion. Despite this positive news, Walgreens upheld its adjusted earnings guidance for fiscal 2025, targeting between $1.40 and $1.80 per share. In a shift away from previous practices, the company did not release annual sales projections, keeping a watchful eye on its trajectory while estimating revenues for the fiscal year to be in the $147 billion to $151 billion range.
These results led to a roughly 10% spike in Walgreens’ stock during premarket hours, reflecting an optimistic investor sentiment in light of the company’s proactive adjustments. Notably, the backdrop of the past year includes pressures from pharmacy reimbursements, altered consumer spending behaviors, and operational hurdles in its shift toward primary care solutions.
Walgreens’ fiscal first-quarter results signified growth across all three of its primary business segments, indicating a well-rounded performance. The U.S. retail pharmacy division generated $30.87 billion in sales, marking a 6.6% increase from the same quarter in the previous year. Analysts had initially estimated sales of around $29.21 billion, highlighting the effectiveness of Walgreens’ strategies to optimize its operations.
Pharmacy sales, in particular, climbed by an impressive 10.4%, with comparable pharmacy sales experiencing a notable increase of 12.7%. These positive metrics were largely driven by inflationary pressures in branded medications, a symptom of current market dynamics. During this period, Walgreens filled 316.3 million prescriptions, including vaccines, representing a 1.5% growth year-over-year. However, the retail segment did experience some setbacks: overall retail sales fell by 6.2%, and comparable retail sales dropped 4.6%. The company cited less severe cough, cold, and flu seasons, along with dwindling sales in discretionary product categories, as factors contributing to this downturn.
Walgreens is also prioritizing its healthcare unit, with sales reaching $2.17 billion, up more than 12% from the prior year, significantly surpassing the anticipated $2.09 billion. This growth is attributed to the expansion of its primary care provider VillageMD and the specialty pharmacy Shields Health Solutions. Specialty pharmacies specialize in supplying medications that require unique handling and distribution, particularly for patients with complex health needs. This growth signals Walgreens’ commitment to diversifying its services and adapting to changing customer needs.
The company’s international unit also shone brightly during the first quarter, reporting sales of $6.43 billion, an impressive 10.2% increase compared to the same period a year ago. Analysts had expected only $5.85 billion, suggesting that Walgreens’ international strategies—especially within its UK-based Boots operation—are bearing fruit as well.
Despite the upbeat headlines, Walgreens reported a net loss of $265 million, or 31 cents per share, exacerbated from the previous year’s loss of $67 million, or 8 cents per share. The primary driver behind this loss was attributable to higher operating expenses associated with Walgreens’ multi-year strategy to close underperforming stores. Over the next three years, 1,200 stores are set to be shuttered, with 500 expected in fiscal 2025 alone. While these closures may generate short-term losses, they are aimed at stabilizing the company’s long-term health.
Walgreens’ quarterly update presents a complex picture of a company in transition. By focusing on operational efficiencies, reducing costs, and enhancing service offerings through healthcare expansions, Walgreens is cautiously optimistic about its future. As the retail pharmacy sector evolves, Walgreens must navigate its challenges with deftness and innovation to reclaim its position as a trusted provider in the healthcare landscape. With momentum from a robust first quarter, the company remains poised to make further advancements in the upcoming periods.