Walgreens announced fiscal second-quarter sales that above Wall Street projections, but dropped the high end of its full-year adjusted profits outlook, citing a "challenging" retail environment in the United States. The business also reported a significant net loss for the quarter, owing to a roughly $6 billion charge related to the drop in value of its stake in primary-care provider VillageMD. Walgreens has shuttered 140 VillageMD clinics due to financial difficulties, which the firm regards as vital to its ongoing efforts to convert from a big drugstore chain into a huge health-care provider.
However, Walgreens does not expect the VillageMD penalty "will have an enormous effect on our monetary status, or our ability to make investments across companies going forward," Walgreens global CFO Manmohan Mahajan stated during an earnings call Thursday.
The findings come as Walgreens' new CEO, Tim Wentworth, attempts to cut expenses and pull the firm out of a rut with a new set of executives. Walgreens stock plunged 30% last year as the business faced declining demand for Covid products, poor pharmacist clearance rates, an uncertain push into health care, and a hard macroeconomic climate.
In a release issued Thursday, the business stated that it is sure that its current cost-cutting effort would allow it to save $1 billion by fiscal 2024. Walgreens has cut off staff, shuttered unproductive shops, and employed artificial intelligence to improve its supply chain efficiency, among other things.
Here's what Walgreens reported for the quarter, compared to what Wall Street expected, based on an analyst poll conducted by LSEG, previously known as Refinitiv:
Earnings per share: $1.20 adjusted, vs 82 cents projected.
Revenue: $37.05 billion, compared to $35.86 billion predicted
Walgreens has reduced its fiscal 2024 adjusted profits target to between $3.20 and $3.35 per share. This contrasts to the company's earlier estimate of $3.20 to $3.50 per share. Analysts polled by LSEG predict full-year
Walgreens said the updated advice reflects the challenges that retailers face in the United States, as well as an early end to its sales-leaseback program. It also accounts for decreased earnings owing to Walgreens' forward sale of shares in pharma wholesaler Cencora, previously known as AmerisourceBergen.
The business stated that a greater performance in its pharmaceutical services division and a lower adjusted effective tax rate helped to offset the issues that weighed on its profitability. However, Mahajan said Walgreens expects the current economic environment to "continue to adversely affect our U.S. retail sales in the short term."
Wentworth stated on the conference that the business is "exploring creative methods to boost sustainability and growth" in its pharmacy store segment, such as by implementing new pharmaceutical payment models.
The corporation did not provide an updated revenue prediction for the fiscal year. Walgreens has not offered that estimate since October, when it forecasted $141 billion to $145 billion in revenue.
The firm recorded a net loss of $5.91 billion, or $6.85 per share, for the quarter. This compared to a net income of $703 million, or 81 cents per share, during the same time last year. a
Adjusted profits per share were $1.20 in the quarter, excluding certain factors such as the $5.8 billion non-cash loss linked to VillageMD. The company's sales in the quarter totaled $37.05 billion, a 6% increase over the same period last year. During the call, Wentworth declined to comment on Eli Lilly's new direct-to-consumer website, which aims to increase access to the weight loss medicine Zepbound.
However, he stated that the firm is a "natural partner" for pharmaceutical companies who "want to go directly to patients for a particular product, where the normal supply chain, reimbursement model, et cetera isn't working effectively." Wenworth used the example of GLP-1s, a novel family of weight reduction and diabetic medications that contains Zepbound. These medications must be taken on a regular basis, but they are expensive, which can be a barrier for patients, insurance plans, and other payers alike.
Walgreens is "uniquely positioned" to distribute pharmaceuticals and serves as a "clinically aligned partner"
Writing By Harmony Inkwell
Head Editor & Chief : Kennedy Lucas Patterson
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