Walgreens narrows loss; cites progress in cost-cutting efforts

Walgreens Boots Alliance reported earnings that missed Street estimates and provided a soft outlook as demand for COVID-19 vaccines and related test kits continued to weaken.

In reporting its results, the pharmacy giant and health care services company cited progress in cutting its costs.

“In just six weeks, we have taken a number of steps to align our cost structure with our business performance, including planned cost reductions of at least $1 billion, and lowered capital expenditures by approximately $600 million,” stated interim CEO Ginger Graham. “We anticipate seeing the impact of these actions in fiscal 2024, beginning in the second quarter.”

Walgreens reported its fourth-quarter two days after it named health care veteran Tim Wentworth as its new CEO, effective Oct. 23.  

The company reported a loss of $180 million, or $0.21 a share, for the quarter ended Aug. 31, down from $415 million, or $0.48 a share, in the year-ago period. Ajusted earnings per share fell 17% to $0.67, missing estimates of $0.69.

Sales grew 9.2% to $35.42 billion, beating estimates of $34.80 billion.  

U.S. retail pharmacy sales rose 3.7% to $27.7 billion. Comparable sales increased 5.7%. Pharmacy sales increased 6.4% compared to the year-ago quarter. Retail sales fell 4.3% and comparable sales fell 3.3% amid a weaker respiratory season and lower sales of COVID-19 OTC test kits.

Walgreens has been working to transform itself into a major health care player.  In a positive sign, sales in the company’s health care division sales rose 21%.  Revenue at primary-care provider VillageMD, which now includes urgent-care provider Summit Health, rose 17%.

International sales increased 12.4% to $5.78 billion. Sales at UK-based Boots were up nearly 11%.

For the full year, Walgreens had sales of $139.1 billion, up 4.8% from the year-ago period. It has a net loss in fiscal 2023 of $3.1 billion, compared with net earnings of $4.3 billion in the year-ago period. The decrease was partially driven by a $5.5 billion after-tax charge for opioid-related claims and litigation in the period.

For fiscal 2024, Walgreens expects adjusted earnings per share of $3.20 to $3.50, below Street estimates of $3.71. It expects revenue of $141 billion to $145 billion. Analysts were expecting sales of more than $144 billion. The company said it expects continuing lower COVID-related sales and a higher tax rate among other things to offset profit growth.

“We see a continuation of the challenging trends that impacted us in 2023,” interim CFO Manmohan Mahajan said during the company's earnings call.