Walgreens, a retail pharmacy giant, reported fiscal fourth-quarter earnings that fell short of expectations as demand for COVID-19 vaccines and tests decreased in the U.S. The company attributed this to the ongoing transition out of the pandemic, recent leadership changes, a shaky push into healthcare, and labor pressure from pharmacy staff. It marks the second consecutive quarter where Walgreens has missed Wall Street’s adjusted earnings expectations, a rare occurrence for the company.
Despite the challenges, Walgreens reported progress in its cost-cutting plans, narrowing losses, and demonstrated sales growth in its healthcare business, which is now a central focus of its strategy. The company’s stock rose more than 4% in response to the quarterly results. Two days before the results, Walgreens announced Tim Wentworth, a healthcare industry veteran, as its new CEO following the abrupt departure of Roz Brewer. Wentworth, formerly the CEO of Cigna’s pharmacy benefits management company, is set to take over on October 23 and faces the task of steering the company through its current challenges.
During the earnings call, Walgreens interim CFO Manmohan Mahajan mentioned the company’s adjusted earnings per share expectation for the coming fiscal year to be between $3.20 and $3.50, lower than analysts’ estimate of $3.72. The company anticipates lower COVID-related sales, a higher tax rate, and lower sale and leaseback contributions to offset earnings growth.
Walgreens also forecasted revenue for the year at $141 billion to $145 billion, slightly below Wall Street analysts’ estimate of over $144 billion. The company acknowledged continuing challenging trends in 2023 and mentioned an expected increase in lost inventory (shrink) in the upcoming fiscal year. However, Interim CEO Ginger Graham highlighted ongoing cost-cutting initiatives, including store closures and AI-driven supply chain efficiency efforts, expecting over $1 billion in savings during the next fiscal year.
In the fiscal fourth quarter, Walgreens’ U.S. retail pharmacy segment reported a 3.7% increase in sales, while its international segment showed over 12% growth. The U.S. healthcare segment also experienced substantial growth, demonstrating the company’s shift towards a health-focused business model. Despite the challenges, Walgreens aims to focus on profitable growth in the healthcare segment moving forward.
