Walgreens (WBA) earnings in the first quarter of 2024

A man walks near a Walgreens pharmacy on March 9, 2023 in New York City.

Leonardo Muñoz | Corbis News | fake images

Walgreens reported fiscal first-quarter adjusted earnings and revenue that beat expectations on Thursday, but cut its quarterly dividend nearly in half.

The retail pharmaceutical giant cut its dividend to 25 cents per share from 48 cents per share to “strengthen [its] long-term balance sheet and cash position,” CEO Tim Wentworth, who officially took the helm during the quarter, said in a statement.

Walgreens’ dividend yield is now 3.9%, based on Wednesday’s closing price. This is significantly lower than its previous yield of more than 7%, which made the company the highest-paying dividend stock in the world. Dow Jones Industrial Average.

It also marks the company’s first dividend cut in nearly five decades. The dividend will be paid on March 12.

The dividend cut comes as Wentworth, a healthcare industry veteran, tries to get the company out of a difficult situation.

Walgreens shares plunged 30% last year as the company grappled with weakening demand for Covid products, low pharmacy reimbursement rates, increasing pressure from online retailers, labor unrest among pharmacy staffing in the fall, an uneven push in healthcare, and a challenging macroeconomic environment. .

But Thursday’s earnings beat marks a turnaround from October, when Walgreens missed earnings estimates for two consecutive quarters for the first time in nearly a decade.

Here’s what Walgreens reported for the three months ending Nov. 30 compared to what Wall Street expected, according to a survey of analysts by LSEG, formerly known as Refinitiv:

  • Earnings per share: Adjusted 66 cents per share vs. expected 61 cents
  • Revenue: $36.71 billion vs. $34.86 billion expected

The company reported a net loss of $67 million, or 8 cents per share, for the fiscal first quarter.

That compares with a net loss of $3.7 billion, or $4.31 per share, during the same period a year ago, when Walgreens was ordered to pay a multimillion-dollar settlement over litigation alleging the company helped fuel the opioid crisis in the country.

The net loss in the most recent quarter included a $278 million after-tax charge related to the forward sale of shares of the drug distributor Walgreens. cencoraformerly known as AmerisourceBergen Corp.

Excluding certain items, adjusted earnings per share were 66 cents for the fiscal first quarter.

Walgreens posted sales of $36.71 billion in the quarter, an increase of about 10% from the same period a year ago.

The company said revenue growth in its U.S. retail pharmacy and international business segments, and sales contributions from its U.S. healthcare division drove the increase. Walgreens is making significant investments to transform itself from a major pharmacy chain into a large healthcare company.

Despite the quarterly gains, Walgreens reiterated its fiscal 2024 adjusted earnings guidance of $3.20 to $3.50 per share.

Walgreens expects lower Covid-related sales, along with a higher tax rate and lower sales and leaseback contributions, to offset profit growth.

The company did not indicate in the earnings release whether it would also maintain its previous revenue guidance of between $141 billion and $145 billion.

Walgreens said during its quarterly earnings call in October that the company expects more than $1 billion in savings during fiscal 2024 due to its ongoing cost-cutting initiative, which involves closing unprofitable stores and using artificial intelligence to drive supply chain efficiency, among other efforts.

Sales growth in pharmacy and healthcare

Walgreens’ U.S. retail pharmacy segment generated $28.94 billion in sales in the fiscal first quarter, an increase of more than 6% from the same period last year. Comparable sales in pharmacies increased 8.1%.

That segment operates more than 8,000 pharmacies throughout the United States, selling prescription and over-the-counter medications, as well as health and wellness, beauty, personal care and food products.

A sign advertises Covid vaccine injections at a Walgreens pharmacy in Somerville, Massachusetts, on August 14, 2023.

Brian Snyder | Reuters

Pharmacy sales for the quarter increased 10.7% compared to the fiscal first quarter of 2023, as comparable sales increased more than 13% due to price inflation on brand-name drugs and “strong execution” in pharmacy services, Walgreens said.

Total prescriptions filled in the quarter, including vaccines, amounted to 311.6 million, stable compared to the same period last year.

Walgreens cited a weaker respiratory virus season this fall, which is reducing demand for drugs and vaccines. The company also noted Medicaid redeterminations, which are routine reviews conducted by each state’s Medicaid agency to determine whether beneficiaries still qualify for coverage.

Retail sales for the quarter fell 6.1% from the same period a year ago, and comparable retail sales fell 5%. Walgreens pointed to the weaker respiratory season, as well as “macroeconomic-driven consumer trends” and store closures over Thanksgiving (a first for the company last year) to explain the decline.

Meanwhile, the company’s international segment, which operates more than 3,000 retail stores overseas, racked up $5.83 billion in sales in the fiscal first quarter. That’s more than 12% compared to the same period a year ago.

The company said sales at Walgreens’ British subsidiary, Boots, grew more than 6%.

Walgreens’ U.S. healthcare segment revenue was $1.93 billion, up from $989 million in the same period last year.

That division includes primary care provider VillageMD, which includes urgent care provider Summit Health, and CareCentrix, which coordinates home care for patients after they are discharged from the hospital.

Walgreens will host an earnings conference call with investors at 8:30 a.m. ET.

— CNBC’s Bertha Coombs and Robert Hum contributed to this report.

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