Walgreens reported a 7% jump in sales to reach $39 billion in its fiscal third quarter, reflecting sales growth in its U.S. retail pharmacy and international segments as well as improvements in its U.S. healthcare businesses.
The retail drugstore chain swung to a loss in the quarter, which ended May 31, reporting a loss of $175 million, or 20 cents per share, compared to earnings of $344 million, or 40 cents a share, during the same period a year ago, the company reported in its fiscal third-quarter earnings.
Walgreens’ results beat Wall Street expectations, based on a survey of analysts by LSEG. The company reported adjusted earnings per share of 38 cents, exceeding the analyst consensus of 34 cents. Walgreens’ quarterly sales also outperformed the $36.8 billion expected by Wall Street.
Walgreens did not host a conference call and withdrew its 2025 guidance given its pending deal to be taken private by investment firm Sycamore Partners. The companies announced the $10 billion deal in March, and analysts expect the deal to close in the third or fourth quarter.
Like other retail pharmacies, Walgreens is facing significant headwinds as retail sales have slowed from softer consumer spending along with pharmacy reimbursement pressure.
“Third quarter results reflect continued improvement in our U.S. healthcare segment and benefits from our cost savings initiatives, while we continued to see weakness in our U.S. front-end sales,” CEO Tim Wentworth said in a statement. “We remain focused on our turnaround plan, which will require time, disciplined focus and a balanced approach to manage future cash needs with investments necessary to navigate an evolving pharmacy and retail environment.”
Third-quarter operating income was $53 million compared to an operating income of $111 million in the year-ago quarter. Third-quarter operating income included a noncash impairment charge related to certain long-lived assets, the company said.
For the three months ending May 31, Walgreens’ retail pharmacy segment brought in sales of $31 billion, up 8% percent from the year-ago quarter.
Pharmacy sales increased 12%, and comparable pharmacy sales increased 15% percent in the quarter, each benefiting from higher branded drug inflation and mix impacts, the company said. Comparable 30-day equivalent prescriptions filled in the third quarter increased 2.7% from the year-ago quarter, while comparable prescriptions excluding immunizations also increased 2.7%. Total 30-day equivalent prescriptions filled in the quarter, including immunizations, increased 0.4% to 308 million.
Retail sales fell 5.3% compared to the fiscal third quarter in 2024, including the impact of the footprint optimization program and lower comparable retail sales. Comparable retail sales decreased 2.4% year over year and were impacted by weaker sales in grocery and household, health and wellness and beauty.
The company is executing a turnaround plan to improve its financial performance that includes closing 1,200 stores, controlling operating costs and addressing reimbursement models. The retail pharmacy giant closed 70 stores during its fiscal 2025 first quarter and plans to close about 450 stores throughout 2025 as it works to improve its cash flow, Wentworth told investors earlier this year.
Walgreens’ healthcare assets including primary care provider VillageMD; Summit Health/CityMD, a provider of primary, specialty and urgent care; CareCentrix, a post-acute and home care provider; and specialty pharmacy Shields Health.
The company intends to sell its VillageMD unit, which includes the VillageMD, Summit Health and CityMD businesses. When the take-private deal was announced, the company said it is looking to all options to improve the financial performance of the primary care provider and will be forming a committee to explore various avenues.
The healthcare segment had third quarter sales of $2.1 billion, a decrease of $23 million. The decline in sales was primarily driven by VillageMD sales decreasing 6.5%, reflecting lower risk-based and fee-for-service revenue, including the impact of clinic closures, the company said.
CareCentrix sales increased 11.6% and Shields sales grew by 24.8%.
The healthcare segment’s operating loss was $64 million, compared to an operating loss of $220 million in the year-ago quarter, reflecting lower acquisition-related amortization and higher contributions from VillageMD risk-based business.
Adjusted EBITDA of $86 million improved by $63 million versus the prior-year quarter, reflecting improvement at VillageMD and growth at Shields, Walgreen said.
During the third quarter, Walgreens’ international segment had third quarter sales of $6.2 billion, up 8% year over year.
Mizuho Securities USA analyst Ann Hynes was upbeat about Walgreens’ strong retail pharmacy sales and positive free cash flow in the quarter “given recent negative free cash flow trends. “We believe this was a good quarter for WBA and view the solid trends in s-s pharmacy sales (+14.6%) as a positive read through for CVS,” Hynes wrote.
Michael Cherny, senior research analyst at Leerink Partners, wrote in a flash note that Walgreens’ pharmacy results were solid relative to market expectations. While front-end retail remains challenged, driven by store closures and softer consumer demand, performance was not materially worse than peers’ performances, Cherny wrote.
Walgreens continued its profit improvement in the healthcare segment, which Cherny attributed to improvement at VillageMD in particular.
For the first nine months of Walgreens’ fiscal 2025, total sales increased 6.3% to $117 billion.
Operating loss in the first nine months of fiscal 2025 was $5.8 billion compared to an operating loss of $13.1 billion in the year-ago period. Operating loss in the current period included a $3 billion noncash impairment charge related to VillageMD goodwill and other long-lived assets, the company said.
Net loss for the first nine months of fiscal 2025 was $3.3 billion, down 42% compared to a net loss of $5.6 billion in the year-ago period.
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