Walgreens Beats Expectations with Strong Q1 Earnings
A Turnaround in Progress
Walgreens, the pharmacy giant, has reported impressive fiscal first-quarter earnings, surpassing Wall Street expectations. Despite a challenging consumer environment, the company’s efforts to cut costs and revamp its business strategy are paying off.
Strong Sales Across Segments
Walgreens’ three business segments – U.S. retail pharmacy, U.S. healthcare, and international – all posted growth in the fiscal first quarter. The company’s total sales reached $39.46 billion, a 7.5% increase from the same period last year.
U.S. Retail Pharmacy Division Sees Growth
The U.S. retail pharmacy division, which operates Walgreens’ drugstores, generated $30.87 billion in sales, a 6.6% increase from the same period last year. Pharmacy sales rose 10.4%, driven by price inflation in brand medications, while comparable pharmacy sales increased 12.7%.
Healthcare Unit Sees Significant Growth
Walgreens’ U.S. healthcare unit saw sales jump to $2.17 billion, a 12% increase from the same period last year. This growth is partly attributed to the expansion of primary-care provider VillageMD and specialty pharmacy company Shields Health Solutions.
International Unit Performs Well
The international unit, which operates over 3,000 retail stores abroad, booked $6.43 billion in sales, a 10.2% increase from the year-ago period. Sales from the U.K.-based drugstore chain, Boots, increased 4.5%.
Store Closures and Labor Refining
As part of its cost-cutting efforts, Walgreens plans to close 1,200 underperforming stores over the next three years, with 500 closures in fiscal 2025 alone. The company is also refining its labor forecasting, allocation, and scheduling to improve the in-store experience for customers, patients, and employees.
Challenges Ahead
Despite the strong earnings, Walgreens still faces challenges in the consumer retail business, which has been impacted by inflation, higher interest rates, and value-seeking behavior from shoppers. However, the company remains committed to its turnaround strategy, with CEO Tim Wentworth noting that “we are progressing a number of elements of our retail strategy” and seeing “early green shoots” of improvement.
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