GuruFocus –
- Sales Growth: Increased 6.9% on a constant currency basis across all segments.
- Adjusted EPS: $0.51, a decline of 23% year over year on a constant currency basis.
- GAAP Net Earnings: Included after-tax charges of $252 million related to Footprint Optimization Program.
- US Retail Pharmacy Comparable Sales: Grew 8.5%, driven by pharmacy sales.
- Pharmacy Comp (WA:) Sales: Increased 12.7%, driven by brand inflation and script volume.
- US Retail Comparable Sales: Declined 4.6%, impacted by lower cough, cold, and flu season.
- International Sales Growth: 6.5% increase with Germany wholesale up 11.3% and Boots UK up 4.5%.
- Boots UK Comp Retail Sales: Increased 8.1% with gains across all categories.
- US Healthcare Sales: $2.2 billion, a 12% increase compared to the prior year quarter.
- Free Cash Flow Improvement: Benefited from decreased capital expenditures and higher adjusted operating income.
- Adjusted Operating Income (AOI): Decreased 36% versus the prior year quarter.
- Store Closures: Approximately 450 store closures sequenced as part of Footprint Optimization Program.
Release Date: January 10, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Walgreens Boots Alliance Inc (NASDAQ:) reported better-than-expected first-quarter results with a 6.9% increase in sales on a constant currency basis.
- The company maintained script market share in the US pharmacy segment and saw strong returns from its international business.
- Walgreens Boots Alliance Inc (NASDAQ:WBA) is executing a Footprint Optimization Program, which has shown early positive results, including better-than-expected script retention and employee engagement.
- The company has successfully renegotiated contracts with PBMs to better align reimbursement with costs, particularly for high-cost drugs.
- Walgreens Boots Alliance Inc (NASDAQ:WBA) improved free cash flow this quarter through decreased capital expenditures and higher adjusted operating income, excluding non-cash impacts.
Negative Points
- Adjusted EPS declined by 23% year over year, driven by prior year sale-leaseback gains and lower Cencora equity income.
- The US retail segment faced challenges with a 4.6% decline in comparable retail sales, impacted by lower consumer discretionary spending and a weaker cough, cold, and flu season.
- The company is facing ongoing pressure from accumulated inflation and higher interest rates affecting consumer behavior.
- Walgreens Boots Alliance Inc (NASDAQ:WBA) is still in the early stages of its turnaround strategy, indicating that substantial work remains to be done.
- The company is undergoing a sale process for noncore assets like VillageMD, with the intent to exit and redeploy proceeds to reduce net debt, highlighting ongoing restructuring challenges.
Q & A Highlights Q: Can you provide more details on the new reimbursement contracts for 2025 and the script retention rates?
A: Timothy Wentworth, CEO, explained that the new reimbursement contracts have been structured to better align with costs, including creating categories for high-cost drugs and rebalancing brands and generics. While the contracts are typically multiyear, they can be revisited as needed. The script retention rates have been better than expected, particularly in stores that have been closed, with a focus on improving the patient experience during transitions.
Q: Are the actions taken to address reimbursement pressures leading to an absolute improvement in 2025?
A: Timothy Wentworth, CEO, stated that the actions taken are leading to both immediate improvements and future stability. The restructuring of contracts has reduced pressure compared to previous years, and the company is on track to achieve its goals over the next three years, focusing on increased value and profitability in pharmacy operations.
Q: Given the strong first-quarter performance, why is the guidance for the year not adjusted?
A: Timothy Wentworth, CEO, noted that the first-quarter strength was driven by good pharmacy volumes and reimbursement for vaccines. The company expects continued improvement in 2025 due to new contracts but maintains guidance due to uncertainties in the retail environment and other factors.
Q: How is Walgreens working with Cencora to improve drug procurement?
A: Timothy Wentworth, CEO, emphasized the importance of modernizing drug procurement to be world-class. Walgreens is working closely with Cencora to achieve competitive pricing and improve long-term procurement strategies, which are expected to benefit both companies.
Q: What are the expectations for free cash flow and the rollout of micro fulfillment centers?
A: Manmohan Mahajan, CFO, highlighted improvements in free cash flow due to better operating performance and reduced capital expenditures. The company is on track with its working capital initiatives. Regarding micro fulfillment centers, Walgreens plans to expand their use to more stores, improving efficiency and allowing pharmacists to focus on patient care.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
