A sign sits in front of a Walgreens store on November 10, 2023 in Wheeling, Illinois.
Scott Olson | Getty Images
Walgreens On Tuesday it reported fiscal fourth-quarter sales and adjusted earnings that beat Wall Street expectations as the company cuts costs in an effort to get out of a difficult position.
The retail pharmacy chain also said it plans to close about 1,200 stores over the next three years, which includes 500 in fiscal 2025 alone. The company said those closings will be “immediately accretive” to adjusted earnings and free cash flow. her.
Walgreens has approximately 8,700 locations in the US, a quarter of which say they are unprofitable.
Those closings will give Walgreens a “healthier store base” and “allow us to respond to changes in consumer behavior and shopping preferences,” the company’s CEO Tim Wentworth said during an earnings call Tuesday . He added that Walgreens aims to employ the majority of the workforce affected by the closing, although it is unclear how many workers will lose their jobs.
The company’s shares jumped about 3% in premarket trading.
The results cap a difficult fiscal 2024 for Walgreens, which is grappling with reimbursement pressure from pharmacy, lower consumer spending and challenges related to its push into primary care, among other issues. The company said Tuesday it exceeded its goal of cutting $1 billion in costs during fiscal 2024, which included closing underperforming stores, laying off workers and using artificial intelligence to make its supply chain more efficient, among other things. efforts.
Most of the benefit from the cost cuts came in the company’s U.S. pharmacy retail division, Walgreens Chief Financial Officer Manmohan Mahajan said during the call.
In June, Walgreens said it plans to close a “significant” number of underperforming stores by 2027. Tuesday’s announcement appears to be the company’s first firm estimate of how many locations it will close.
Here’s what Walgreens reported for the quarter ended Aug. 31 compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: Adjusted 39 cents vs. 36 cents expected
- Annuity: $37.55 billion versus $35.76 billion expected
Walgreens posted sales 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 that aims 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 prior period.
Excluding certain items, adjusted earnings were 39 cents per share for the quarter.
The fourth-quarter and full-year results “reflected our disciplined execution of cost management, working capital initiatives and capital reduction,” Wentworth, who took the role nearly a year ago, said in a statement .
The company’s guidance for fiscal 2025 was in line with analysts’ expectations. Walgreens expects growth in its U.S. healthcare and international services segments to be offset by a decline in its retail pharmacy segment.
The company is engaged in a “multi-year process of reshaping our relationship” with pharmacy benefit managers, who negotiate drug discounts on behalf of health plans and reimburse pharmacies for prescription drugs, Wentworth said during the call. Walgreens hopes it will help improve profit margins in its pharmaceutical businesses.
Walgreens expects adjusted earnings per share of $1.40 to $1.80 next fiscal year. Analysts forecast adjusted earnings of $1.75 per share, according to LSEG.
The company also sees revenue for the year at $147 billion to $151 billion. Wall Street analysts estimate sales at $147.3 billion.
Development in all three business units
Walgreens reported growth across its three business segments in the fiscal fourth quarter.
Sales from the company’s US healthcare unit jumped to $2.11 billion, up 7.1% from the same period a year ago.
Analysts had expected sales of $2.10 billion, according to estimates compiled by StreetAccount.
This partly reflects the growth of primary care provider VillageMD and specialty pharmacy company Shields Health Solutions. Shields sales rose 27.8% during the period, which the company attributed to growth in existing partnerships.
Specialty pharmacies are designed to provide drugs with unique handling, storage and dispensing requirements, often for patients with complex conditions such as cancer and rheumatoid arthritis.
Notably, Walgreens posted a sharp net loss in its fiscal second quarter as it recorded a nearly $6 billion charge related to the decline in the value of its VillageMD investment. In August, the company said in a securities filing that it was considering selling the provider.
A sign advertises Covid vaccines at a Walgreens pharmacy in Somerville, Massachusetts, on August 14, 2023.
Brian Snyder | Reuters
Walgreens’ U.S. retail pharmacy division posted sales of $29.47 billion in the fiscal fourth quarter, up 6.5 percent from the same period last year. Analysts had expected sales of $28.09 billion, according to estimates compiled by StreetAccount.
This segment operates the company’s pharmacies, which sell prescription and non-prescription drugs, as well as health and wellness, beauty, personal care and food products.
Walgreens said pharmacy sales for the quarter rose 9.6% and comparable pharmacy sales rose 11.7% compared to the prior period due to price inflation for brand name drugs, among other factors.
Total prescriptions filled in the quarter including vaccines totaled 302 million, up 1.7% from the same period last year. Specifically, the decline in prescription drug reimbursement rates was limited to pharmacy margins, the company said.
Retail sales were down 3.5% from the year-ago quarter and comparable retail sales were down 1.7%. The company cited a “challenging” retail environment, among other factors.
Walgreens’ international unit, which operates more than 3,000 retail stores overseas, posted sales of $5.97 billion in the fiscal fourth quarter. This is an increase of 3.2% compared to last year.
Analysts had expected revenue of $5.81 billion for the period, according to StreetAccount.
The company said sales from its UK-based pharmacy chain Boots rose 2.3%.