Walgreens, one of the largest drugstore chains in the United States, has reported fiscal second-quarter sales that exceeded Wall Street’s expectations. However, the company has adjusted its profit outlook for the year due to the challenging retail environment in the country. The company also recorded a significant net loss for the quarter, primarily due to a decline in the value of its investment in primary-care provider VillageMD.
Walgreens has been closing several VillageMD clinics as it faces financial difficulties. The company believes that VillageMD is crucial to its transformation into a large healthcare company. The new CEO, Tim Wentworth, is focused on slashing costs and steering the company out of a rough spot.
Despite the challenges, Walgreens remains confident in its cost-cutting program and expects to save $1 billion by fiscal 2024. The company has implemented various measures such as employee layoffs, store closures, and the use of artificial intelligence to improve its supply chain efficiency.
For the fiscal second quarter, Walgreens reported adjusted earnings per share of $1.20, exceeding analysts’ expectations of 82 cents. Revenue for the quarter was $37.05 billion, higher than the expected $35.86 billion. The company has narrowed its adjusted earnings guidance for fiscal 2024 to between $3.20 and $3.35 per share.
Walgreens attributes its improved performance to a stronger performance in its pharmacy services segment and a lower adjusted effective tax rate. However, the company did not provide a new revenue forecast for the fiscal year.
Walgreens has witnessed growth across all its divisions. Sales in its U.S. health-care division jumped approximately 33% compared to the same period last year. The segment’s revenue reached $2.18 billion, driven by VillageMD’s acquisition of Summit Health and growth across all businesses in the segment.
In the U.S. retail pharmacy segment, which operates over 8,000 drugstores, sales for the quarter amounted to $28.86 billion, a nearly 5% increase from the previous year. Walgreens reported an 8.2% increase in pharmacy sales, driven by price inflation in brand medications and strong execution in pharmacy services. Total prescriptions filled, including immunizations, increased by more than 2% compared to the same period last year.
However, retail sales for the quarter declined by 4.5%, and comparable retail sales decreased by 4.3%. The company attributed this to a challenging retail environment and a weaker respiratory season.
Walgreens’ international segment, which operates more than 3,000 retail stores abroad, posted $6.02 billion in sales for the fiscal second quarter, a growth of over 6%. Sales from its UK subsidiary, Boots, grew by 3%.
Overall, despite the challenges faced by Walgreens, the company has managed to exceed revenue expectations and remains optimistic about its cost-cutting initiatives. The pharmacy services segment and international sales have been strong contributors to its performance. As Walgreens continues to navigate the challenging retail landscape, investors will be closely watching its progress and cost-saving efforts.
