Drugstore chain Walgreens exceeds expectations with cost-cutting efforts.

• Walgreens reported higher-than-expected fiscal first-quarter earnings and revenue, despite shutting down stores and reducing other expenses to improve its financial position.
• Despite facing challenges such as pharmacy reimbursement pressure, softer consumer spending, and difficulties in expanding into primary care, the company ended 2024 on a positive note.
• Walgreens did not provide a sales outlook in its release, but kept its fiscal 2025 adjusted earnings guidance of $1.40 to $1.80 per share.

On Friday, Walgreens reported higher-than-expected fiscal first-quarter earnings and revenue, despite shutting down stores and reducing other expenses to get out of a financial crisis.

Based on a survey of analysts by LSEG, Walgreens' three-month performance ended Nov. 30 exceeded Wall Street's expectations.

• Earnings per share: 51 cents adjusted vs. 37 cents expected
• Revenue: $39.46 billion vs. $37.36 billion expected

Despite the big beats, Walgreens kept its fiscal 2025 earnings guidance of $1.40 to $1.80 per share. The company did not provide annual sales guidance in its release. In October, Walgreens stated that it anticipates revenue for the fiscal year to be between $147 billion and $151 billion.

Shares jumped about 10% in premarket trading.

Despite facing challenges such as pharmacy reimbursement pressure, softer consumer spending, and difficulties in expanding into primary care, the company has reported positive results. These results come amid rumors that the company is considering selling itself to private equity firm Sycamore Partners.

In the first quarter of the fiscal year, Walgreens recorded sales of $39.46 billion, which was a 7.5% increase from the previous year's first quarter, as all three of its business segments experienced growth.

In the fiscal first quarter, the company recorded a net loss of $265 million, which amounts to 31 cents per share. This is a significant increase from the net loss of $67 million, or 8 cents per share, reported in the year-earlier period.

Walgreens stated that its loss was mainly due to increased operating expenses, resulting from its three-year plan to shut down poorly performing stores. This plan involves closing 1,200 stores, with 500 to be closed in fiscal 2025 alone.

Its website states that Walgreens has approximately 8,500 retail pharmacy locations in the U.S.

The adjusted earnings for the quarter were 51 cents per share.

Walgreens CEO Tim Wentworth stated in a release that the first-quarter results demonstrate our commitment to achieving our 2025 priorities by optimizing our retail pharmacy footprint, controlling operating costs, improving cash flow, and addressing reimbursement models.

Although our turnaround will require time, our early progress strengthens our confidence in a sustainable retail pharmacy-led business model.

Growth across business units

Walgreens posted growth across its three business segments in the fiscal first quarter.

The company's U.S. retail pharmacy division generated $30.87 billion in sales, exceeding analysts' expectations of $29.21 billion.

The company's drugstores are operated by that unit, which offers a range of products including prescription and nonprescription medications, health and wellness items, beauty products, personal care items, and food products.

Pharmacy sales at Walgreens increased by 10.4% in the quarter, with a 12.7% rise in comparable sales compared to the previous year. This was due to factors such as price inflation in brand medications.

In the quarter, the total number of prescriptions filled, including vaccines, was 316.3 million, which represents a 1.5% increase from the same period in the previous year. However, retail sales decreased by 6.2% compared to the prior-year quarter, and comparable retail sales fell by 4.6%. The company attributed this decline to a weaker cough, cold and flu season and lower sales in discretionary product categories.

The company's U.S. health-care unit experienced a 12.5% increase in sales to $2.17 billion in the first fiscal quarter, exceeding analysts' expectations of $2.09 billion.

Specialty pharmacies are specifically designed to handle, store, and distribute medications with unique requirements, typically for patients with complex conditions.

In the fiscal first quarter, Walgreens' international unit, which operates over 3,000 retail stores outside the US, generated $6.43 billion in sales, representing a 10.2% increase from the previous year.

According to StreetAccount, analysts predicted a revenue of $5.85 billion for the period.

Sales at Boots, the company's U.K.-based drugstore chain, rose by 4.5%.