WBA reports Q2 results
Walgreens Boots Alliance's second quarter sales increased 4.1% from the year-ago quarter to $38.6 billion, an increase of 4.7% on a constant currency basis, reflecting sales growth in the U.S. retail pharmacy and international segments.
“Second quarter results reflect disciplined cost management and improvement in U.S. Healthcare, which were partially offset by weaker front-end results in U.S. Retail Pharmacy, while significant legal settlements resulted in continued negative free cash flow," said CEO Tim Wentworth.
Wentworth continued, "We remain in the early stages of our turnaround plan, and continue to expect that meaningful value creation will take time, enhanced focus and balancing future cash needs with necessary investments to navigate a changing pharmacy and retail landscape.”
[Read more: Walgreens makes $10B take-private deal with Sycamore]
The company's second quarter operating loss was $5.6 billion compared to an operating loss of $13.2 billion in the year-ago quarter. Operating loss in the current quarter includes a $3 billion non-cash impairment charge related to VillageMD goodwill and other long-lived assets, which resulted in a $1.9 billion charge attributable to WBA, net of tax and non-controlling interest, and a $2.3 billion non-cash impairment charge attributable to WBA, net of tax, primarily related to U.S. retail pharmacy goodwill. Operating loss in the year-ago quarter includes a $12.4 billion non-cash impairment charge related to VillageMD goodwill, which resulted in a $5.8 billion charge attributable to WBA, net of tax and non-controlling interest, and a $455 million non-cash impairment charge related to certain long-lived assets in the U.S. retail pharmacy segment.
WBA's adjusted operating income was $785 million compared to adjusted operating income of $900 million in the year-ago quarter, reflecting lower U.S. retail sales in the current quarter and sale-leaseback gains in the year-ago quarter, partly offset by cost savings within U.S. retail pharmacy and growth in U.S. healthcare.
The company's net loss in the second quarter was $2.9 billion, a decrease of 51.7% compared to a net loss of $5.9 billion in the year-ago quarter, reflecting non-cash impairment charges partly offset by $1 billion of after-tax gains on early settlement of variable prepaid forward derivatives related to the monetization of Cencora shares and gains on investments in BrightSpring.
WBA's adjusted net earnings decreased 47.6% to $543 million, down 47.2% on a constant currency basis, reflecting an adjusted effective tax benefit in the year-ago quarter due to the recognition of deferred tax assets in foreign jurisdictions and lower adjusted operating income.
The company's loss per share in the second quarter was $3.30 compared to loss per share of $6.85 in the year-ago quarter. Adjusted EPS was 63 cents compared to adjusted EPS of $1.20 in the year-ago quarter, reflecting a decrease of 47.3% on a constant currency basis.
WBA's sales in the first six months of fiscal 2025 increased 5.8% from the year-ago period to $78 billion, an increase of 5.8% on a constant currency basis, reflecting sales growth across all business segments.
The company's operating loss in the first six months of fiscal 2025 was $5.8 billion compared to an operating loss of $13.2 billion in the year-ago period. Operating loss in the current period included a $3 billion non-cash impairment charge related to VillageMD goodwill and other long-lived assets, which resulted in a $1.9 billion charge attributable to WBA, net of tax and non-controlling interest, and a $2.3 billion non-cash impairment charge attributable to WBA, net of tax, primarily related to U.S. Retail Pharmacy goodwill. Operating loss in the year-ago period included a $12.4 billion non-cash impairment charge related to VillageMD goodwill, which resulted in a $5.8 billion charge attributable to WBA, net of tax and non-controlling interest, and a $455 million non-cash impairment charge related to certain long-lived assets in the U.S. Retail Pharmacy segment.
WBA's adjusted operating income was $1.4 billion, compared to adjusted operating income of $1.6 billion in the year-ago period, reflecting lower U.S. retail sales in the current period and sale-leaseback gains in the year-ago period, partially offset by cost savings within the U.S. Retail Pharmacy segment and growth in the U.S. Healthcare segment.
The company's net loss for the first six months of fiscal 2025 was $3.1 billion, a decrease of 47.8% compared to a net loss of $6 billion in the year-ago period, reflecting non-cash impairment charges partly offset by $1 billion in after-tax gains on early settlement of variable prepaid forward derivatives related to the monetization of Cencora shares and gains on investments in BrightSpring.
Adjusted net earnings decreased 38.8% to $983 million, down 38.7% on a constant currency basis, reflecting an adjusted effective tax benefit in the year-ago period due to the recognition of deferred tax assets in foreign jurisdictions and lower adjusted operating income.
Loss per share in the first six months was $3.61 compared to loss per share of $6.93 in the year-ago period, reflecting a decrease of 47.9%. Adjusted EPS was $1.13 compared to adjusted EPS of $1.86 in the year-ago period, reflecting a decrease of 38.8% on a constant currency basis.
U.S. Retail Pharmacy segment:
The U.S. Retail Pharmacy segment had second quarter sales of $30.4 billion, an increase of 5.3% from the year-ago quarter. Comparable sales increased 8.2% from the year-ago quarter.
Pharmacy sales increased 8.9% and comparable pharmacy sales increased 12.2% in the quarter, each benefiting from higher branded drug inflation and prescription volume. Comparable 30-day equivalent prescriptions filled in the second quarter increased 3.4% from the year-ago quarter, while comparable prescriptions excluding immunizations increased 3.9%. Total 30-day equivalent prescriptions filled in the quarter, including immunizations, increased 1.2% to 309 million.
Retail sales decreased 5.5% and comparable retail sales decreased 2.8% from the year-ago quarter, driven by lower sales in discretionary categories including beauty, seasonal and general merchandise. Cough cold flu season negatively impacted retail sales by approximately 45 basis points compared to the year-ago quarter, an improvement compared to the fiscal first quarter.
Operating loss in the current quarter was $2.3 billion, including a $2 billion non-cash goodwill impairment charge, reflecting continued softness in U.S. retail sales, the impact of recent legal settlements and a higher discount rate.
Adjusted operating income decreased 35.2% to $487 million from $752 million in the year-ago quarter, reflecting lower retail sales in the current quarter and sale-leaseback gains in the year-ago quarter. The decrease was partially offset by cost savings, the company said.
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International segment:
The International segment had second quarter sales of $6.1 billion, an increase of 0.6% from the year-ago quarter, including an adverse currency impact of 3.5%. Sales increased 4.1% on a constant currency basis, with the Germany wholesale business growing 7.2% and Boots UK sales growing 1.6%.
Boots UK comparable pharmacy sales increased 5% on a constant currency basis compared with the year-ago quarter. Boots UK comparable retail sales increased 5.1% on a constant currency basis compared to the year-ago quarter with growth across all categories. Boots.com sales grew 19.5%, or 20.4% on a constant currency basis, representing over 20% of Boots total retail sales.
Adjusted operating income decreased 4.7% to $234 million, a decrease of 2.5% on a constant currency basis compared with the year-ago quarter, reflecting cost inflation primarily driven by payroll, along with technology investments. The decrease was partially offset by strong retail performance in Boots UK and market growth in Germany, the company said.
U.S. Healthcare segment:
The U.S. Healthcare segment had second quarter sales of $2.2 billion, a decrease of $23 million, reflecting lower fee-for-service and risk-based revenue at VillageMD, including the impact of clinic closures. The decrease was partially offset by growth in Shields and CareCentrix. VillageMD sales decreased 6.2%, CareCentrix sales increased 6.5% and Shields sales increased 29.7%.
Operating loss was $3.3 billion, reflecting the non-cash impairment charge related to VillageMD goodwill and other long-lived assets, driven by market indications of value received during the second quarter as part of the ongoing sale process for legacy Village Medical and updated management forecasts for VillageMD's calendar year 2025, which were lower than previous projections for certain businesses used in the valuation completed during the fourth quarter of fiscal 2024. As a result, future earnings and losses of VillageMD will be fully attributed to the Company. This impairment of VillageMD is based on its estimated fair value as of Feb. 28, 2025, which is not necessarily representative of the price to be received in connection with any future sale transactions relating to VillageMD, if any such transactions should occur.
Adjusted operating income, which excludes impairment charges, certain costs related to stock compensation expense and amortization of acquired intangible assets, was $117 million compared to a loss of $34 million in the year-ago quarter.
Adjusted EBITDA of $158 million improved by $140 million versus the prior year quarter, reflecting improvement at VillageMD and growth at Shields.
On March 6, 2025, WBA entered into a definitive agreement to be acquired by entities affiliated with Sycamore Partners. The merger is expected to close in the fourth quarter of calendar year 2025, pending shareholder and regulatory approvals and other conditions to closing.
Upon completion of the transaction, WBA common stock will no longer be listed on the Nasdaq Stock Market, and WBA will become a private company. As is customary during the pendency of such a transaction, WBA will not host a conference call and webcast or provide financial guidance for fiscal year 2025 in conjunction with this quarter’s report. In addition, WBA’s previously issued guidance for full year fiscal 2025 should no longer be relied upon.