Walgreens Tops Wall Street Expectations as Drugstore Chain Continues Turnaround Plan

Walgreens Boots Alliance, Inc. (WBA) has reported better-than-expected fiscal first quarter earnings, signaling progress in its ongoing turnaround plan. The drugstore chain, which has been grappling with shrinking prescription reimbursement, rising costs, and other challenges, announced a plan in October to close around 1,200 locations. The company's shares jumped 16% in early morning trading on Friday, marking a better start than the stock had last year.

Walgreens reported adjusted earnings per share of 51 cents, excluding store closing costs, which was higher than analysts' expectations of 38 cents per share. Revenue grew 7.5% to $39.5 billion, surpassing the expected $37.4 billion. The company's main business, established U.S. retail pharmacies, saw sales grow more than 8%, driven by a jump in prescriptions. This countered a drop in sales for the retail area outside store pharmacies, partly due to a weaker cough, cold, and flu season.

The company also saw growth from its U.S. health care business, which it has been scaling back. Walgreens reaffirmed its forecast for fiscal 2025 adjusted earnings per share ranging between $1.40 and $1.80, with analysts forecasting earnings of $1.52 per share.

Walgreens' turnaround plan includes closing underperforming stores and focusing on its most profitable locations. The company expects the store closures to be immediately accretive to adjusted EPS and free cash flow. By realigning its footprint to a healthier store base, Walgreens aims to respond more dynamically to shifts in consumer behavior and buying preferences.

The company's U.S. healthcare segment is another key driver of growth. In the fiscal first quarter, the segment saw strong revenue growth, with VillageMD revenue growing 7% to bring in $1.5 billion. Walgreens is also reviewing its U.S. healthcare business, including its VillageMD clinic business, and may consider selling all or part of it. This strategic review is part of the company's efforts to focus on its core competencies and improve its long-term growth prospects.



Walgreens' turnaround plan is a critical step in addressing the challenges faced by the drugstore chain. By closing underperforming stores, focusing on its most profitable locations, and exploring strategic partnerships or divestments in its healthcare services, Walgreens aims to create a more sustainable and profitable business model for the future.



Investors should monitor Walgreens' progress in implementing its turnaround plan, as well as the company's financial performance and growth prospects. By focusing on key performance indicators such as store closures, revenue growth, adjusted earnings per share, operating cash flow, and the performance of its U.S. healthcare segment, investors can better evaluate Walgreens' turnaround progress and make more informed decisions about the company's stock.