TLDR:
- Walgreens Boots Alliance reported better-than-expected Q4 2024 results
- Q4 EPS was $0.39, revenue increased 6% to $37.54 billion
- Plans to close 1,200 stores over the next three years
- FY2025 guidance: EPS $1.40-$1.80, revenue $147-151 billion
- Stock jumped over 11% following the earnings report
Walgreens Boots Alliance, the retail pharmacy giant, reported better-than-expected fourth-quarter results for fiscal year 2024 on Tuesday, causing its stock to surge more than 11%.
The company’s earnings per share came in at $0.39, surpassing analyst estimates of $0.36, while revenue increased 6% year-over-year to $37.54 billion, also beating expectations of $35.75 billion.
Despite the positive quarterly results, Walgreens faces ongoing challenges in its U.S. Retail Pharmacy segment. The company announced plans to close approximately 1,200 stores over the next three years as part of a footprint optimization program.
This initiative includes closing around 500 locations in fiscal year 2025 alone. Walgreens expects these closures to have an immediate positive impact on adjusted earnings per share and free cash flow.
The company’s U.S. Retail Pharmacy segment, which accounts for the majority of its revenue, saw sales increase by 6.5% to $29.47 billion.
Comparable sales in this segment rose 8.3%, driven by higher brand inflation and mix impacts. Pharmacy sales specifically increased by 9.6%, with comparable pharmacy sales up 11.7%. However, retail sales within this segment decreased by 3.5%, reflecting a challenging retail environment and continued channel shift.
Walgreens’ U.S. Healthcare segment reported sales of $2.11 billion, a 7.2% increase year-over-year. This growth was primarily attributed to VillageMD, which saw a 7.2% increase in sales due to additional risk lives and fee-for-service revenue. Shields, another component of the healthcare segment, grew by 27.8%, driven by growth within existing partnerships.
The company’s international sales reached $5.97 billion, representing a 3.2% year-over-year increase and exceeding analyst projections of $5.84 billion.
Looking ahead to fiscal year 2025, Walgreens provided guidance that bracketed consensus estimates. The company expects earnings per share to range between $1.40 and $1.80, compared to the analyst consensus of $1.75. Revenue is projected to be between $147 billion and $151 billion, while analysts were expecting $145.6 billion.
Walgreens’ new CEO, Tim Wentworth, acknowledged that the company’s turnaround efforts will take time but expressed confidence that they will yield significant financial and consumer benefits over the long term.
The guidance for fiscal year 2025 assumes that growth in U.S. Healthcare and International operations will be more than offset by a decline in the U.S. Retail Pharmacy segment, a higher tax rate, lower contributions from strategic partnerships, and reduced earnings from corporate operations.
The company also reported success in its cost-saving initiatives for fiscal year 2024, exceeding targets for $1 billion in cost savings, a $600 million reduction in capital expenditures, and $500 million in working capital initiatives. Additionally, Walgreens achieved a net debt reduction of $1.9 billion and a lease obligations reduction of $1.2 billion in fiscal 2024.
Walgreens stock, which had fallen 65% in 2024 and hit a multi-decade low in late September, rebounded strongly following the earnings report.
The positive market reaction suggests that investors are cautiously optimistic about the company’s turnaround strategy and its ability to navigate the challenging retail pharmacy landscape.
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