Walgreens reported a loss of $2.85 billion in its fiscal second quarter, pulled down by a hefty impairment charge related to its investment in primary care business VillageMD and its U.S. retail pharmacy business.
The company reported a second-quarter loss per share of $3.30 compared to loss per share of $6.85 during the year-ago quarter. The company reported a loss of $5.9 billion in the fourth quarter of 2024.
Second-quarter results include $4.2 billion of noncash impairment charges related to goodwill, intangible and other long-lived assets primarily at U.S. retail pharmacy VillageMD and $1 billion of after-tax gains related to asset monetization activities, the company said in its earnings news release.
Walgreens' second-quarter sales reached $38.6 billion, up by 4.1% from a year ago, reflecting growth in the U.S. retail pharmacy and international businesses.
The company reported adjusted earnings per share of 63 cents.
The retail drugstore chain's results beat Wall Street expectations, based on a survey of analysts by LSEG. Analysts were expecting adjusted earnings per share of 53 cents and revenue of $38 billion in the second quarter.
Walgreens withdrew its 2025 guidance given its pending deal to be taken private by investment firm Sycamore Partners. The companies announced the $10 billion deal in March, and it's expected to close in the fourth quarter.
“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," CEO Tim Wentworth said in a statement. "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.”
Walgreens' second-quarter operating loss was $5.6 billion compared to an operating loss of $13.2 billion a year ago.
"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," the company said in its news release.
Adjusted operating income in the second quarter was $785 million compared to adjusted operating income of $900 million in the second quarter of 2024, 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 said.
Walgreens announced the $10 billion deal with Sycamore Partners in early March, following weeks of speculation and rumors that the private equity firm was planning to take over Walgreens and take the company private. Walgreens has struggled financially of late, battered by headwinds that have struck the retail pharmacy industry as well as challenges at its VillageMD unit.
The company continues to execute a turnaround plan to improve its financial performance that includes closing 1,200 stores, controlling operating costs and addressing reimbursement models.
The retail pharmacy giant closed 70 stores during its fiscal 2025 first quarter and plans to close about 450 stores throughout 2025 as it works to improve its cash flow, Wentworth told investors.
The company intends to sell its VillageMD unit, which includes the VillageMD, Summit Health and CityMD businesses. When the take-private deal was announced, the company said it is looking to all options to improve the financial performance of the primary care provider and will be forming a committee to explore various avenues.
The committee "intends to consider all paths available to maximize the value of these businesses, including actions to significantly enhance operational performance and strengthen the balance sheet of the businesses, ahead of any future monetization transaction or transactions," per the press release.
In the second quarter, Walgreens' U.S. retail pharmacy segment reported sales of $30.4 billion, up 5.3% from the year-ago quarter. Pharmacy sales grew 8.9% compared to a year ago, benefiting from higher branded drug inflation and prescription volume.
Retail sales dropped 5.5% year over year, driven by lower sales in discretionary categories including beauty, seasonal and general merchandise. Cough, cold and 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, the company said.
Operating loss in the current quarter was $2.3 billion, including a $2 billion noncash goodwill impairment charge, reflecting continued softness in U.S. retail sales, the impact of recent legal settlements and a higher discount rate.
The U.S. healthcare segment reported second-quarter revenue 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, partially offset by growth in Shields and CareCentrix, the company said.
VillageMD sales fell 6.2%, CareCentrix sales grew 6.5% and Shields sales jumped by 29.7% in the second quarter compared to the same quarter a year ago.
Operating loss was $3.3 billion, reflecting the noncash impairment charge related to VillageMD goodwill and other long-lived assets, the company said.
The international segment had second-quarter sales of $6.1 billion, up 0.6%.