Walgreens posts $344 million profit as CEO calls for patience on turnaround

Walgreens Boots Alliance Net income reported Thursday from $344 million in the third quarter, as CEO Tim Wentworth asked for patience as the drugstore giant executes its financial turnaround plan.

Although Walgreens’ net income nearly tripled in the three months ended May 31 compared to the previous year’s quarter, when the company reported just $118 million in net income, executives lowered the company’s expectations for the remainder of the fiscal year during a challenging period. time for its flagship pharmacy business.

Walgreens now says fiscal 2024 adjusted earnings per share will be $2.80 to $2.95, “due to challenging trends in the pharmaceutical industry and a worse-than-expected consumer environment.” Earlier this year, Walgreens cut its fiscal 2024 adjusted earnings per share to $3.20 to $3.35.

“We continue to face a difficult business environment, including continued pressure on the American consumer and the impact of recent market dynamics that have eroded pharmacy margins,” CEO Wentworth said in a statement accompanying the company’s third-quarter earnings report. “Our results and outlook reflect these headwinds, despite solid performance in both our international and U.S. healthcare segments.”

Despite revealing that earnings per share would be lower than previous forecasts, the third quarter was at least profitable compared to the second quarter, when Walgreens reported a huge loss that “included a $5.8 billion non-cash impairment after-tax related to VillageMD’s goodwill. .”

Walgreens, which invested more than $6 billion under former CEO Roz Brewer take a controlling interest in Chicago-based startup VillageMD, is scaling back the expansion of the doctors’ offices and clinics the company opened next to Walgreens. On Thursday, Walgreens said the company’s operating loss for the first nine months of fiscal 2024 grew to $13.1 billion, due to “a $12.4 billion non-cash impairment charge related to VillageMD goodwill, which resulted in a charge of $5.8 billion attributable to WBA, net of tax interests and non-controlling interests.”

Walgreens third-quarter revenue rose 2.6 percent to $36.4 billion from the year-earlier quarter as the company’s healthcare business, which includes VillageMD, begins to see brighter days.

The US healthcare segment, which also includes fast-growing specialty pharmacy unit Shields Health Solutions, reported a 7 percent increase in sales to $2.1 billion. Meanwhile, operating loss in the US Healthcare segment was $220 million, compared to an operating loss of $522 million in the same period last year.

“Based on our strategic review, we are focused on improving our core business: retail pharmacies, which are central to the future of healthcare,” said Wentworth. “We are addressing critical issues with urgency and working to unlock growth opportunities. Many of these actions will take time, but I am confident we have the right team and strategy to lead a business turnaround for the Walgreens our customers and patients need.”

Walgreens said it was “completing a multi-year footprint optimization program to close certain underperforming U.S. stores.” Walgreens’ press release did not mention how many stores would close among the more than 8,600 locations the company has in the U.S.

Walgreens reported that retail pharmacy sales rose just 2.3 percent to $28.5 billion, while total prescriptions, including vaccinations, were 306.4 million, up just 0.5 percent. This underperforming growth contributed to a 47.9 percent decline in adjusted operating income to $501 million, compared to $1 billion in the same period a year ago.

“We continue to face a difficult business environment, including continued pressure on the American consumer and the impact of recent market dynamics that have eroded pharmacy margins,” Wentworth said. “Our results and outlook reflect these headwinds, despite solid performance in both our International and US Healthcare segments.”