To say that pharmacy retailer Walgreens Boots Alliance (WBA 3.19%) has been struggling would be a massive understatement. It's coming off a horrendous year in 2024, when its share price crashed by 64%. The stock has been trading around levels it hasn't been at in decades as investors are concerned about the company's future.However, contrarian investors may hope that this can be a good turnaround play. That assumes that Walgreens can drastically cut costs and improve its financials as it focuses on profitab ...

The top executive at Walgreens lamented the loss of sales from putting items like toothpaste behind lock and key to crack down on rampant shoplifting that has plagued pharmacy chains around the country.“When you lock things up…you don’t sell as many of them. We’ve kind of proven that pretty conclusively,” Tim Wentworth, CEO of Walgreens Boots Alliance, told investors during a recent earnings call.He went on to say that grappling with retail theft was akin to a “hand-to-hand combat battle” and called the ant ...

About this content About Emily Jarvie Emily began her career as a political journalist for Australian Community Media in Hobart, Tasmania. After she relocated to Toronto, Canada, she reported on business, legal, and scientific developments in the emerging psychedelics sector before joining Proactive in 2022. She brings a strong journalism background with her work featured in newspapers, magazines, and digital publications across Australia, Europe, and North America, including The Examiner, The Advocate, ...

Shares of Walgreens Boots Alliance (WBA 2.86%) fell sharply last year as a combination of declining vaccine demand, headwinds on consumer discretionary spending, and misguided acquisitions led to a series of dismal earnings reports from the company.As a result, Walgreens was forced to cut its dividend, took a multibillion-dollar impairment charge, and lost its place in the Dow Jones Industrial Average (^DJI 0.52%). According to data from S&P Global Market Intelligence, the stock fell 64% over the course of ...

The Walgreens store at 3646 N. Broadway in Chicago on Nov. 28, 2024. The Wall Street Journal ... [+] reported that Walgreens Boots Alliance is considering selling the company to a private equity firm. (Terrence Antonio James/Chicago Tribune/Tribune News Service via Getty Images)TNSWalgreens stock surged 27% on Friday, Jan 10, after the company reported upbeat Q1 (fiscal ends in August) results. It reported revenue of $39.5 billion and adjusted earnings of $0.51 per share, compared to the consensus estimates ...

Core Viewpoint - Walgreens Boots Alliance has shown signs of recovery in early 2025 after a significant decline in 2024, with better-than-expected fiscal Q1 2025 results indicating ongoing turnaround efforts [1] Financial Performance - Revenue increased by 7.5% year over year to $39.5 billion, surpassing analyst expectations, while adjusted EPS fell 29% to $0.51, exceeding the consensus of $0.37 [2] - U.S. retail pharmacy sales rose 6.6% year over year, with same-store sales up 8.5%, although comparable retail sales decreased by 4.6% due to a slower cold and flu season [3] - Adjusted operating income for the U.S. pharmacy business dropped 36.4% year over year to $441 million, with gross margins declining from 18.8% to 17% [4] Store Closures and Strategy - The company closed 67 locations in the quarter and plans to close approximately 450 more by the end of 2025, which is expected to improve profitability in the long run [5][9] - Initial inventory management and merchandising efforts have begun, although these have negatively impacted retail sales in the quarter [5] International Performance - International sales grew by 6.5% year over year, with Boots UK sales up 4.6%, and adjusted operating income increased by 16.1% to $168 million [6] Healthcare Segment - Revenue from the U.S. healthcare segment rose 12% year over year to $2.17 billion, with significant growth in partnerships such as VillageMD and specialty pharmacy Shields [7] Debt and Cash Flow - The company ended the quarter with $8.1 billion in debt and $1.2 billion in cash, generating negative free cash flow of $424 million due to seasonal inventory buildups [8] Future Outlook - Walgreens maintains its fiscal full-year guidance for adjusted EPS of $1.40 to $1.80, indicating confidence in its recovery strategy [8] - The company’s contracts for 2025 are expected to alleviate some reimbursement pressures, which is a critical area to monitor [10] Valuation - Walgreens trades at a forward P/E ratio of 7.7 and an enterprise value to EBITDA multiple of 5, suggesting the stock is undervalued [12] Competitive Landscape - The company faces competition from Walmart and Amazon, which are capitalizing on Walgreens' store closures by offering free same-day prescription deliveries [13]

Core Viewpoint - Walgreens Boots Alliance shares surged 27.5% on January 10, 2024, but this is insufficient to recover from a 64% decline in the previous year [1] Financial Performance - In the fiscal first quarter ending November 30, 2024, adjusted earnings were $0.51 per share, exceeding Wall Street's consensus estimate of $0.40 per share, although still less than half of previous earnings [4] - Walgreens provided a forward-looking guidance range of $1.40 to $1.80 per share for fiscal 2025, compared to the analyst expectation of $1.58 per share [5] - U.S. retail pharmacy sales increased by 6.6% year over year, but adjusted operating income from U.S. retail operations fell to 1.3% of sales, down from 4% two years ago [10] Analyst Insights - Evercore analyst raised the price target for Walgreens from $9 to $12 per share, reflecting a positive adjustment but still close to the stock's closing price of $11.75 [6] Industry Challenges - The retail pharmacy industry faces significant pressure from vertically integrated pharmacy benefits managers (PBMs) that control 79% of prescription drug claims, which Walgreens lacks [7][8] - The rise of low-cost providers like Mark Cuban's Cost Plus Drugs has made dispensing generic drugs a low-margin business, impacting Walgreens' profitability [9] Operational Losses - Walgreens' U.S. healthcare segment reported a loss of $325 million in the fiscal first quarter, contributing to an overall operating loss of $245 million for the period [11] - The high dividend yield of over 8% is attractive, but without profits, there is a risk of future dividend cuts [12]

Market Overview - Major U.S. equities indexes experienced a decline, with the S&P 500 dropping 1.5%, the Dow down 1.6%, and the Nasdaq also falling 1.6% as the market resumed trading after a day of mourning for former President Jimmy Carter [2][3] Employment Data Impact - The U.S. economy added 256,000 jobs in December, significantly surpassing economists' forecasts, which raised concerns about the Federal Reserve's ability to implement further interest rate cuts in 2025 [2] Company Performance - Constellation Brands (STZ) saw its shares plummet 17.1% after reporting lower-than-expected quarterly sales and reducing its annual forecast, citing inflationary pressures and changing consumer preferences [4] - PG&E (PCG) shares fell 10.8% due to ongoing wildfires in Southern California, with the company previously declaring Chapter 11 bankruptcy in 2019 related to fire damages [5] - ON Semiconductor (ON) shares decreased by 7.5% after Truist downgraded the stock from "buy" to "hold," expressing a cautious outlook despite management's belief in a revenue recovery [6] - Walgreens Boots Alliance (WBA) shares surged 27.6% following better-than-expected sales and adjusted profits for Q1 of fiscal 2025, indicating early progress in its turnaround plan [7] - Constellation Energy (CEG) shares increased by 25.2% after announcing the acquisition of Calpine, enhancing its presence in California and Texas and positioning it as the largest clean energy provider in the U.S. [8] - Delta Air Lines (DAL) shares rose 9% after the airline provided optimistic first-quarter profit guidance, anticipating strong travel demand [9]

Core Viewpoint - The improving retail pharmacy business of Walgreens Boots Alliance and comments from the CEO suggest that a buyout from private equity is unlikely in the near future [1][7]. Financial Performance - Walgreens reported a wider net loss in its fiscal first quarter compared to the previous year, but noted several operating improvements across its business segments [2]. - The company's stock price surged by over 25% following the earnings report, increasing its market value and making it less attractive for private equity buyout [4]. Strategic Initiatives - CEO Tim Wentworth highlighted that Walgreens maintained its script market share in U.S. pharmacy, showed strong returns in its international business, and exceeded expectations in its U.S. healthcare segment [4]. - The company is progressing on essential opportunities for its long-term turnaround, including a footprint optimization plan that involves significant store closures [5][6]. Market Outlook - Analysts believe Walgreens is on the path to recovery without the need for private equity assistance, with expectations for continued execution on its optimization strategy [5][6]. - The company plans to close approximately 450 stores in the full year, with 70 closures already mentioned in the quarter [6].

Sales Performance - Sales for the three months ended November 30, 2024 increased by 10.2% to $6.4 billion, with a favorable currency impact of 3.6 percentage points[189] - Pharmacy sales decreased by 1.5% in the three months ended November 30, 2024, but comparable pharmacy sales in constant currency increased by 8.3%[190] - Retail sales increased by 9.6% for the three months ended November 30, 2024, with a favorable currency impact of 5.1 percentage points[191] - Pharmaceutical wholesale sales increased by 14.2% for the three months ended November 30, 2024, with a favorable currency impact of 2.9 percentage points[192] - U.S. Healthcare segment sales increased by $241 million to $2.2 billion for the three months ended November 30, 2024, driven by growth in all businesses[203] Operating Income and EBITDA - Operating income for the three months ended November 30, 2024 increased by 21.4% to $141 million, with a favorable currency impact of 1.5 percentage points[195] - Adjusted operating income for the three months ended November 30, 2024 increased by 17.9% to $168 million, with a favorable currency impact of 1.8 percentage points[196] - Adjusted operating income for the U.S. Healthcare segment improved by $121 million to $25 million for the three months ended November 30, 2024[207] - Adjusted EBITDA for the U.S. Healthcare segment improved by $109 million to $70 million for the three months ended November 30, 2024[208] - U.S. Retail Pharmacy segment reported an operating income of $17 million for Q1 2025, compared to $297 million in Q1 2024[217] - Adjusted operating income for the U.S. Healthcare segment improved to $25 million in Q1 2025 from a loss of $96 million in Q1 2024[217] - Adjusted EBITDA for the U.S. Healthcare segment increased to $70 million in Q1 2025 from a loss of $39 million in Q1 2024[222] Financial Adjustments and Costs - Total adjustments to operating loss amounted to $838 million in Q1 2025, up from $726 million in Q1 2024[219] - Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. were $440 million in Q1 2025, down from $571 million in Q1 2024[219] - Adjusted diluted net earnings per common share were $0.51 in Q1 2025, compared to $0.66 in Q1 2024[221] - Footprint optimization costs were $333 million in Q1 2025, primarily related to restructuring activities[217][219] - Acquisition-related amortization costs were $269 million in Q1 2025, slightly down from $275 million in Q1 2024[217][219] - Acquisition and disposition-related costs were $104 million in Q1 2025, down from $163 million in Q1 2024[217][219] - Transformational cost management resulted in a net benefit of $15 million in Q1 2025, compared to a cost of $109 million in Q1 2024[217][219] - Total impairment charges for long-lived assets were $279 million in the three months ended November 30, 2024, compared to $162 million in the same period in 2023[8] Cash Flow and Liquidity - Cash, cash equivalents, and restricted cash decreased to $1.3 billion as of November 30, 2024, from $3.2 billion as of August 31, 2024[231] - Net cash used for operating activities decreased to $140 million in Q1 2025 from $281 million in Q1 2024, driven by lower opioid legal payments and higher operating income[245] - Net cash used for investing activities was $76 million in Q1 2025, compared to net cash provided by investing activities of $85 million in Q1 2024[247] - Net cash used for financing activities was $1.7 billion in Q1 2025, compared to net cash provided by financing activities of $186 million in Q1 2024[250] - Proceeds from debt were $3.2 billion in Q1 2025, down from $4.0 billion in Q1 2024, primarily from revolving credit facilities[251] - Payments of debt totaled $4.7 billion in Q1 2025, including $1.2 billion for 3.800% unsecured notes and $290 million for a senior unsecured term loan[253] - Cash dividends paid decreased to $216 million in Q1 2025 from $415 million in Q1 2024[255] - The company has repurchased $8.0 billion of its common stock under the June 2018 stock repurchase program as of November 30, 2024[256] - The company expects to fund its liquidity needs through cash flow from operations, existing credit facilities, and monetization of investments and other assets[230] Debt and Credit Ratings - The company had outstanding total debt of $8.1 billion as of November 30, 2024, with $446 million classified as current[235] - The company reduced its outstanding lease liability by $652 million during the three months ended November 30, 2024[238] - The company has an aggregate borrowing capacity of $5.8 billion under committed revolving credit facilities, expiring in fiscal 2026 and 2027[236] - Credit ratings as of January 9, 2025: Moody's Ba3 (Stable outlook), S&P BB- (Stable outlook)[258] - Long-term credit ratings were downgraded to BB (S&P) and Ba3 (Moody's) in fiscal 2024, impacting borrowing costs and access to capital markets[260] - The company's credit ratings significantly reduce its ability to issue commercial paper and may increase the cost of new financing[260] Legal and Pension Liabilities - The company accrued a total liability of $6.6 billion related to opioid-related claims and litigation settlements as of November 30, 2024[239] - The company made approximately $435 million in contributions to the Boots Pension Plan and estimates remaining contributions of $410 million to $480 million by the end of fiscal 2026[240] Capital Expenditures - Capital expenditure decreased to $284 million in Q1 2025 from $506 million in Q1 2024, driven by reduced spending on U.S. Retail Pharmacy and VillageMD projects[249] Critical Accounting Estimates - Critical accounting estimates include business combinations, leases, goodwill impairment, and long-lived assets impairment[263]