Walgreens reported fiscal second-quarter sales that exceeded expectations but adjusted its full-year earnings outlook due to challenges in the U.S. retail environment. The company recorded a significant net loss of nearly $6 billion related to its primary-care provider VillageMD, which it sees as crucial for its transformation into a health-care company. The new CEO, Tim Wentworth, is implementing cost-cutting measures, including layoffs and store closures, to steer the company in a positive direction. Walgreens aims to save $1 billion by fiscal 2024 through ongoing cost-cutting efforts.
In terms of performance for the quarter, Walgreens reported adjusted earnings per share of $1.20, which surpassed analyst expectations. Revenue for the quarter was $37.05 billion, higher than the expected $35.86 billion. The company narrowed its fiscal 2024 adjusted earnings guidance to $3.20 to $3.35 per share, compared to the previous range of $3.20 to $3.50. Walgreens cited challenges facing U.S. retailers and the wind-down of sales-leaseback programs as factors impacting its revised guidance.
Walgreens saw growth across all divisions, with its U.S. health-care division standing out as sales increased by about 33% in the fiscal second quarter compared to the previous year. Revenue for the segment reached $2.18 billion, driven by acquisitions and growth in all businesses on a pro-forma basis. Sales from VillageMD grew by 20%, while Shields Health Solutions, the specialty pharmacy company, saw a 13% increase in sales due to new contracts and expansions.
The U.S. retail pharmacy segment of Walgreens, which operates over 8,000 drugstores, generated $28.86 billion in sales in the fiscal second quarter, up almost 5% from the prior year. Pharmacy sales increased by 8.2%, with total prescriptions filled reaching 305.7 million. However, retail sales declined by 4.5% due to various factors, including a challenging retail environment and a weaker respiratory season. Walgreens’ international segment, with over 3,000 retail stores abroad, posted $6.02 billion in sales, a more than 6% increase from the year-ago period.
Overall, Walgreens remains focused on its transformation into a health-care company, with VillageMD being a key component of this strategy. The company’s efforts to cut costs and improve efficiencies are aimed at driving profitability and long-term success. While facing challenges in the retail sector, Walgreens is optimistic about meeting its cost-saving goals and navigating through the evolving market dynamics. With a strong performance in its pharmacy services segment and positive growth across divisions, Walgreens is working towards delivering value to its customers and stakeholders.
