Walgreens reported a stronger-than-anticipated performance for its fiscal first quarter, offering some optimism to investors regarding the drugstore chain’s efforts to rejuvenate its faltering operations.
On Friday, the company’s stock surged following comments from executives indicating successful strides in addressing one of the major issues in the industry—diminishing prescription reimbursements. They also mentioned that the plan to close underperforming stores was advancing better than initially projected.
CEO Tim Wentworth shared with analysts that the company has effectively renegotiated contracts with commercial insurers, Medicare, and Medicaid regarding prescription payments, including adjustments for expensive medications. Additionally, he noted that Walgreens is successfully reallocating prescriptions from U.S. stores identified for closure to other operational locations. In October, the company disclosed intentions to shut down approximately 1,200 of its less successful U.S. outlets.
During the fiscal first quarter, Walgreens closed 70 stores and has plans to shut around 500 this year. The chain operates about 8,500 outlets across the U.S. and Puerto Rico, along with thousands more in Europe and Asia.
Despite ongoing challenges such as inflation leading to reduced consumer spending and persistent theft issues, with Wentworth describing these as “hand-to-hand combat,” the overall performance of the company showed positive signs. Analyst John Boylan from Edward Jones commented on the favorable fiscal first quarter results but cautioned that it’s too soon to declare that Walgreens is on a secure path to recovery, as the changes in prescription reimbursement could take time to manifest and their effects remain unpredictable.
In the reported quarter, Walgreens posted adjusted earnings per share of 51 cents, excluding costs related to store closures, which contributed to an overall loss of $265 million. Revenue saw a 7.5% increase, reaching $39.5 billion.
Analysts had projected earnings of 38 cents per share on sales totaling $37.4 billion. Furthermore, Walgreens reiterated its earnings forecast from October for fiscal 2025, expecting adjusted earnings per share to range from $1.40 to $1.80, with analysts estimating a mid-point of $1.52.
At the beginning of 2024, Walgreens opted to reduce its quarterly dividend to shareholders by nearly 50% to bolster its financial standing and ensure liquidity. While no updates on the dividend were announced on Friday, Chief Financial Officer Manmohan Mahajan stated that the company is still assessing “the appropriateness and size of our dividend” as it aligns with its capital allocation strategy.
Following its dividend cuts at the start of 2024, Walgreens shares experienced a significant drop and have not yet recovered. Over the year, the stock lost about two-thirds of its value, contrasting with the nearly 13% rise of the Dow Jones Industrial Average during the same period.
However, Walgreens stock has shown much stronger performance at the start of 2025, rising over 26% to reach $11.64 in trading on Friday morning.
