Walgreens shares soar 27% on big earnings beat, as drugstore chain cuts costs

People make their way near a Walgreens pharmacy on March 09, 2023 in New York City.

Leonardo Munoz | Corbis News | Getty Images

Walgreens on Friday reported fiscal first-quarter earnings and revenue that topped expectations, as it shutters stores and cuts other costs to steer itself out of a rough spot.

Here’s what Walgreens reported for the three-month period ended Nov. 30 compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

Earnings per share: 51 cents adjusted vs. 37 cents expected
Revenue: $39.46 billion vs. $37.36 billion expected

Even after the big beats, Walgreens maintained its fiscal 2025 adjusted earnings guidance of $1.40 to $1.80 per share. The company did not include annual sales guidance in its release. In October, Walgreens said it expects revenue for the fiscal year of $147 billion to $151 billion.

The company’s shares spiked 27% on Friday.

“We’ve started the fiscal year by making progress against our financial and strategic priorities, despite the challenging backdrop for our consumer,” Walgreens CEO Tim Wentworth said during an earnings call Friday.

“Importantly, we started to progress on the opportunities that we consider essential to our longer term turnaround,” he said, adding that the “cornerstone” of that effort is stabilizing its U.S. retail pharmacy business.

Walgreens capped off a rocky past year marked by pharmacy reimbursement pressure, softer consumer spending at its stores and challenges related to its push into primary care, among other issues. The results come amid reports that the company is in talks to sell itself to private equity firm Sycamore Partners.

During the fiscal first quarter, Walgreens booked sales of $39.46 billion, up 7.5% from the same period a year ago, as its three business segments grew.

The company reported a net loss of $265 million, or 31 cents per share, for the fiscal first quarter. It compares with a net loss of $67 million, or 8 cents per share, for the year-earlier period.

Walgreens said the loss was primarily driven by higher operating losses, which reflect its multiyear plan to close underperforming stores. That includes 1,200 over the next three years, with 500 in fiscal 2025 alone.

Walgreens has around 8,500 retail pharmacy locations across the U.S., according to its website. The company expects to “significantly ramp the pace of our store closures from the first quarter level,” Wentworth said.

Excluding certain items, adjusted earnings were 51 cents per share for the quarter.

Apart from the store closures, Wentworth said Walgreens is “refining the way we forecast, allocate and schedule labor” in its stores. The company is launching a new scheduling model in about 200 locations in January to improve the in-store experience for customers, patients and employees.

The changes will schedule workers based on store-specific demand patterns, while also accounting for team member availability and preferences, he said.

Wentworth noted, however, that turning around the consumer retail business has been “made more challenging by the persistent deterioration in consumer discretionary spending.” Shoppers face pressure from inflation and higher interest rates, and continue to show value-seeking behavior, Wenworth said.

“We are progressing a number of elements of our retail strategy,” he said. “While we are seeing early green shoots, we still have substantial work to do here.”