Walgreens Boots Alliance, which fell short of a third-quarter earnings estimate despite better-than-expected revenues, reported it is reconfiguring its retail pharmacy operations in a plan that includes closing underperforming stores.
Company net earnings were $344 million, or 40 cents per diluted share, versus $118 million, or 14 cents per diluted share, in the year-previous quarter. Adjusted for one-time events, net earnings were $545 million, or 63 cents per diluted share, versus $860 million, or $1 per diluted share, in the year-before period.
An analyst consensus estimate published by Yahoo Finance called for earnings per adjusted diluted share of 68 cents and revenues of $35.94 billion.
Net sales were $36.35 billion versus $35.42 billion in the year-earlier quarter, the company reported. Operating income was $111 million versus an operating loss of $477 million in the year-prior period, while adjusted operating income was $613 million versus adjusted operating income of $959 million.
In the U.S. Retail Pharmacy segment, net sales were $28.5 billion and operating income was $237 million in the 2024 quarter, with an adjusted operating income of $501 million. In the 2023 third quarter, segment net sales were $27.87 billion and operating income was $395 million, while adjusted operating income was $962 million. Comparable store sales, including pharmacy, increased by 3.5% while retail comps declined by 2.3%, hurt by promotional activity and higher shrink levels.
In a conference call, Walgreens CEO Tim Wentworth said retail customers have become increasingly price-sensitive, which caused the company to increase promotions and adjust pricing in the third quarter. In a strategic review, Walgreens determined that stores in the United States require an updated customer experience that better serves current shoppers. In retail pharmacy, Walgreens will build categories where it has advantages, such as women’s health and health and beauty, and it is consolidating the company’s supplier lineup based on relevancy and success, removing some national brands and filling in with private-label items and goods from preferred partners, Wentworth said.
The company also plans to boost omnichannel operations, including same-day delivery and the MyWalgreens loyalty program, even as it restructures corporate operations. As for the retail portfolio, Wentworth said 75% of stores contribute 100% of segment-adjusted operating income, so the company has launched a store footprint initiative that it expects will include closing “a significant proportion” of the 25% of locations that are underperforming over the next three years.
In announcing the financial results, Wentworth said, “Informed by our strategic review, we are focused on improving our core business: retail pharmacy, which is central to the future of healthcare. We are addressing critical issues with urgency and working to unlock opportunities for growth. Many of these actions will take time, but I am confident that we have the right team and the right strategy to lead a business turnaround for the Walgreens that our customers and patients need.”
In looking back on the third quarter, Wentworth said, “We continue to face a difficult operating environment, including persistent pressures on the U.S. consumer and the impact of recent marketplace dynamics which have eroded pharmacy margins. Our results and outlook reflect these headwinds, despite solid performance in both our International and U.S. Healthcare segments.”
