Walgreens (WBA) earnings Q3 2024

Shares of Walgreens plunged greater than 20% on Thursday after the corporate reported fiscal third-quarter earnings that fell in need of expectations and slashed its full-year adjusted profit outlook, citing a “difficult” environment for pharmacies and U.S. consumers.

The retail pharmacy giant now expects fiscal 2024 adjusted earnings of $2.80 to $2.95 per share. That compares with the corporate’s previous outlook of between $3.20 and $3.35 per share.

“‘We assumed … within the second half that the buyer would get somewhat stronger” but “that just isn’t the case,” Walgreens CEO Tim Wentworth told CNBC. 

He added that “the buyer is completely stunned by absolutely the prices of things, and the indisputable fact that a few of them is probably not inflating doesn’t actually change their resistance to the present pricing. So we have needed to get really keen, particularly in discretionary things.” 

Still, Walgreens topped revenue estimates for the quarter on strong performance in its health-care segment. The corporate views that business division as critical to its ongoing push to remodel from a serious drugstore chain right into a large health-care company. 

The outcomes come as Walgreens works to slash costs after a rocky last 12 months marked by low pharmacy reimbursement rates, weakening demand for Covid products and a difficult macroeconomic environment. 

The corporate on Friday said it’s simplifying its U.S. health-care portfolio and finalizing plans to shut underperforming U.S. stores over multiple years, amongst other ongoing cost-cutting efforts. 

“Seventy-five percent of our stores drive 100% of our profitability today,” Wentworth said. “What meaning is the others we take a tough take a look at, we’re going to finalize a number that we’ll close.”

Here’s what Walgreens reported for the three-month period ended May 31 compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

• Earnings per share: 63 cents adjusted vs. 68 cents expected
• Revenue: $36.4 billion vs. $35.94 billion expected

Walgreens booked sales of $36.4 billion for the quarter, up 2.6% from the identical period a 12 months ago. 

The corporate reported net income of $344 million, or 40 cents per share, for the quarter. That compares with net income of $118 million, or 14 cents per share, for a similar period a 12 months ago.

Excluding certain items, adjusted earnings were 63 cents per share for the quarter. 

Walgreens didn’t provide a recent revenue forecast for the fiscal 12 months. The corporate has not offered that guidance since October, when it said it expected $141 billion to $145 billion in sales. 

Those results come one quarter after Walgreens posted a steep net loss because it recorded a hefty nearly $6 billion charge related to the decline in value of its investment in VillageMD. The corporate now plans to shutter 160 VillageMD clinics, executives announced throughout the company’s fiscal second-quarter earnings call in March. 

“We’re working with their management team to ultimately still be an investor, but meaningfully reduce our investment in addition to gain some liquidity in order that we are able to invest back within the retail pharmacy business that represents our future,” Wentworth told CNBC of the corporate’s investment in VillageMD.

Walgreens’ U.S. retail pharmacy segment generated $28.5 billion in sales within the fiscal third quarter, a rise of two.3% from the identical period last 12 months. Analysts had expected sales of $28.34 billion, in keeping with estimates compiled by FactSet. 

That segment operates greater than 8,000 drugstores across the U.S., which sell prescription and nonprescription drugs in addition to health and wellness, beauty, personal care, and food products.  

The corporate said that sales growth got here entirely from comparable pharmacy sales and was partially offset by a decline in retail revenue.

Walgreens said pharmacy sales for the quarter rose 4.4% and comparable pharmacy sales increased 5.7% compared with the year-earlier period as a result of price inflation in brand medications and prescription growth. 

Total prescriptions filled within the quarter including vaccines totaled 306.4 million, a 0.5% increase from the identical period a 12 months ago. 

Retail sales for the quarter fell 4% from the prior-year quarter, and comparable retail sales declined 2.3%. The corporate pointed to a “difficult” retail environment, amongst other aspects. 

Walgreens’ international segment, which operates greater than 3,000 retail stores abroad, posted $5.73 billion in sales within the fiscal third quarter. That is a rise of two.8% from the year-ago period.

The corporate said sales from its U.K.-based drugstore chain, Boots, grew 1.6%.

Walgreens reportedly scrapped plans for a possible initial public offering of the subsidiary and is in informal talks with potential buyers, including private equity firms, Bloomberg News reported earlier this month.

But Wentworth said Walgreens has no plans to sell the chain.

“Immediately, there isn’t any query Boots is a serious contributor to us,” he told CNBC.

— CNBC’s Bertha Coombs contributed to this report.