Walgreens reported fiscal second-quarter sales that exceeded expectations, but lowered its full-year adjusted earnings outlook due to challenges in the U.S. retail environment. The company recorded a substantial net loss as it took a nearly $6 billion goodwill impairment charge related to VillageMD, its primary-care provider. Walgreens is working to transition from a major drugstore chain to a broader health-care company under new CEO Tim Wentworth, who has been implementing cost-cutting measures such as employee layoffs and store closures.
In the second quarter, Walgreens reported adjusted earnings per share of $1.20 and revenue of $37.05 billion, surpassing Wall Street estimates. 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. Analysts expect full-year adjusted earnings of $3.24 per share. Walgreens cited challenges facing retailers in the U.S. and the early termination of sales-leaseback programs in its revised outlook, while noting a stronger performance in its pharmacy services segment helped offset some of the earnings pressures.
Walgreens posted a net loss of $5.91 billion for the quarter, largely driven by the goodwill impairment charge related to VillageMD. Despite the impairment charge, the company achieved a 6% increase in sales compared to the same period a year ago. Sales growth was reported across all three business segments, with the U.S. health-care division seeing a significant 33% jump in revenue. Walgreens attributed this growth to VillageMD’s expansion of services and increased sales from Shields Health Solutions, a specialty pharmacy company.
The U.S. retail pharmacy segment, which includes over 8,000 drugstores selling prescription and nonprescription drugs, reported sales of $28.86 billion in the fiscal second quarter. Pharmacy sales increased by 8.2%, driven by price inflation in brand medications and strong performance in pharmacy services. Total prescriptions filled in the quarter, including immunizations, rose by over 2% from the previous year. Retail sales, however, declined by 4.5%, reflecting a challenging retail environment and lower demand during the respiratory season.
Walgreens’ international segment, consisting of over 3,000 retail stores abroad, recorded $6.02 billion in sales in the second quarter, a more than 6% increase from the year-ago period. Sales from its U.K. subsidiary, Boots, grew by 3%. The company remains focused on its transformation to a leading health-care provider, with ongoing efforts to improve operational efficiency and cost savings through initiatives like store closures and artificial intelligence utilization in its supply chain. Despite headwinds in the retail sector, Walgreens is optimistic about meeting its cost-saving goals for fiscal 2024.
