A person walks past a Walgreens truck, owned by the Walgreens Boots Alliance, in Manhattan, New York on November 26, 2021.
Andrew Kelly | Reuters
Walgreens On Tuesday, the group reported fourth-quarter revenue and adjusted profit that beat Wall Street expectations, as the company cuts costs to try to extricate itself from a difficult situation.
The retail pharmacy chain also announced plans to close around 1,200 stores over the next three years, including 500 in fiscal 2025 alone. The company said the closures would have an “immediately accretive” effect on its profit. adjusted and its free cash flow.
Walgreens has approximately 8,700 locations in the United States, a quarter of which would not be profitable, according to her.
Shares of the company jumped about 8% in premarket trading.
The results cap a difficult fiscal 2024 for Walgreens, which is grappling with pharmacy reimbursement pressure, declining consumer spending and challenges related to its penetration into primary care, among other issues. The company said Tuesday it exceeded its goal of cutting $1 billion in costs in fiscal 2024, which included, among other efforts, closing underperforming stores, laying off employees and use of artificial intelligence to make its supply chain more efficient.
In June, Walgreens announced plans to close a “significant” number of its underperforming stores by 2027. Tuesday’s announcement appears to be the company’s first exact estimate of how many locations it will will close.
Here’s what Walgreens reported for the three months ended Aug. 31, compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: 39 cents adjusted versus 36 cents expected
- Revenue: $37.55 billion versus $35.76 billion expected
Walgreens reported revenue of $37.55 billion for the quarter, up 6% from the same period last year.
The company reported a net loss of $3 billion, or $3.48 per share, for the fiscal fourth quarter. This reflects a so-called valuation allowance intended to reduce the company’s deferred tax assets primarily related to opioid settlements.
That compares with a net loss of $180 million, or 21 cents per share, for the year-ago period.
Excluding certain items, adjusted earnings were 39 cents per share for the quarter.
The fourth quarter and full year results “reflect our disciplined execution of cost management, working capital initiatives and capital reductions,” Walgreens CEO Tim said in a statement. Wentworth, who took office almost a year ago.
The company’s guidance for fiscal 2025 was in line with analysts’ expectations. Walgreens expects growth in its U.S. and international healthcare segments, which will be offset by a decline in its retail pharmacy segment.
Walgreens expects adjusted earnings per share of between $1.40 and $1.80 for the next fiscal year. Analysts expect adjusted earnings of $1.75 per share, according to LSEG.
The company also expects revenue for the year to be between $147 billion and $151 billion. Wall Street analysts estimate sales at $147.3 billion.
Growth in all three business units
Walgreens reported growth across all three of its business divisions during the fiscal fourth quarter.
Sales at the company’s U.S. healthcare unit jumped to $2.11 billion, up 7.1% from the same period last year.
Analysts were expecting revenue of $2.10 billion, according to estimates compiled by StreetAccount.
That partly reflects the growth of primary care provider VillageMD and specialty pharmaceutical company Shields Health Solutions. Shields’ sales jumped 27.8% during the period, which the company attributed to growth in existing partnerships.
Specialty pharmacies are designed to dispense medications with unique handling, storage and dispensing requirements, often for patients with complex diseases such as cancer and rheumatoid arthritis.
Walgreens notably posted a sharp net loss in the fiscal second quarter as it took a hefty charge of nearly $6 billion related to the decline in the value of its investment in VillageMD. In August, the company said in a securities filing that it was considering selling the supplier.
A sign advertises Covid vaccine shots at a Walgreens pharmacy in Somerville, Massachusetts on August 14, 2023.
Brian Snyder | Reuters
Walgreens’ U.S. retail pharmacy segment generated revenue of $29.47 billion in the fiscal fourth quarter, an increase of 6.5% from the same period last year. Analysts had expected revenue of $28.09 billion, according to estimates compiled by StreetAccount.
This segment operates the Company’s pharmacies, which sell prescription and over-the-counter medications as well as health and wellness, beauty, personal care and food products.
Walgreens said drugstore sales for the quarter increased 9.6% and comparable drugstore sales increased 11.7% from the prior-year period due to, among other factors, price inflation of branded drugs.
Total prescriptions filled during the quarter, including vaccines, were 302 million, an increase of 1.7% compared to the same period last year. Notably, falling reimbursement rates for prescription drugs have reduced pharmacy margins, the company said.
Retail sales fell 3.5% from the year-ago quarter and comparable retail sales declined 1.7%. The company cited, among other factors, a “challenging” retail environment.
Walgreens’ international unit, which operates more than 3,000 overseas retail stores, reported revenue of $5.97 billion in the fiscal fourth quarter. This represents an increase of 3.2% compared to last year.
Analysts were expecting revenue of $5.81 billion for the period, according to StreetAccount.
The company said sales at its UK-based pharmacy chain Boots rose 2.3%.
