Image Source: Walgreens
By Brian Nelson, CFA
On January 10, Walgreens (WBA) reported better than feared first quarter results of fiscal 2025 with revenue and non-GAAP earnings per share coming in higher than the consensus forecast. Fiscal first quarter sales increased 7.5% from the year-ago quarter and 6.9% on a constant currency basis. Adjusted operating income was $593 million in the quarter compared to adjusted operating income of $687 million in the year-ago period. Adjusted earnings per share came in at $0.51 versus adjusted earnings per share of $0.66 in the year-ago quarter.
Management had the following to say about the quarterly results:
Our first quarter results reflect our disciplined execution against our 2025 priorities: stabilizing the retail pharmacy by optimizing our footprint, controlling operating costs, improving cash flow and continuing to address reimbursement models. While our turnaround will take time, our early progress reinforces our belief in a sustainable, retail pharmacy-led operating model.
The company’s U.S. Retail Pharmacy segment experienced a sales increase of 6.6% from the year ago quarter, hitting an all-time high, while comparable sales increased 8.5% from the year-ago quarter. Pharmacy sales increased 10.4% and comparable pharmacy sales increased 12.7%, while retail sales fell 6.2% and comparable retail sales dropped 4.6%. Sales increased 10.2% in its International segment and 6.5% on a constant currency basis. Boots UK comparable pharmacy sales increased 10.9% in the quarter on a year-over-year basis, while Boots UK comparable retail sales advanced 8.1% compared to the year-ago quarter. Its U.S. Healthcare segment experienced 12.5% revenue growth in the quarter.
Walgreens’ net cash used for operating activities was $140 million in the first quarter, a $141 million improvement from last year’s quarter, while free cash flow was negative $424 million, a $363 million improvement compared with the year-ago period driven in part by a decrease in capital expenditures of $223 million. Walgreens ended the quarter with $1.2 billion in cash and marketable securities and $8.1 billion in short and long-term debt.
Looking to 2025, Walgreens maintained its adjusted earnings per share guidance of $1.40-$1.80 (consensus was at $1.53), noting “growth in U.S. Healthcare and International segments more than offset by a decline in U.S. Retail Pharmacy, a higher adjusted effective tax rate, and lower contributions from sale-leaseback and Cencora earnings.” Shares of Walgreens are trading at just 7.4x current fiscal year earnings, while boasting a yield of 8.5% at the time of this writing. Though improving, free cash flow continues to be negative at Walgreens, however, and while its dividend is far from safe after its dividend cut, the company is working aggressively to get things back on track.
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Brian Nelson owns shares in SPY, SCHG, QQQ, QQQM, DIA, VOT, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, QQQM, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, RSP, SCHG, QQQ, QQQM, and VOO. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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