Walgreens Boots Alliance reported impressive fiscal first-quarter results that surpassed expectations, driven by notable sales growth across its divisions. While the drugstore chain has reiterated its full-year earnings outlook, it acknowledges the ongoing challenges in the U.S. retail landscape. During the quarter ending on November 30, the adjusted earnings fell to $0.51 per share, compared to $0.66 in the previous year.
This downward trend was primarily influenced by lower retail sales in the U.S. and gains from prior-year sale-leaseback transactions. Analysts had anticipated normalized EPS of $0.38, which further underscores the positive surprise in Walgreens' financial performance. Sales surged by 7.5%, reaching $39.46 billion, which outpaced the FactSet-poll consensus expectation of $37.4 billion.
In response to the strong sales performance, Walgreens shares soared by 24% in midday trading. "We've started the fiscal year by making significant progress against our financial and strategic priorities despite the tough backdrop for our consumers," stated Chief Executive Officer Tim Wentworth during an earnings call.
He emphasized that the operational earnings during the period were bolstered by effective cost management initiatives and relative strength in Walgreens' U.S. pharmacy services, counterbalancing the softness observed in front-end retail as the company adapts to evolving consumer behavior. The revenue for the U.S.
retail pharmacy segment improved by 6.6%, reaching $30.87 billion. Comparable sales also grew by 8.5%, with same-store pharmacy sales seeing an impressive increase of nearly 13%. This boost in pharmacy sales was largely attributed to the inflation of branded drugs and increased prescription volume. However, the retail segment experienced declines in revenue and comparable sales due to a weaker cough-cold-flu season and diminished discretionary spending by consumers. In the international market, sales rose by 10% to $6.43 billion, benefiting from a favorable currency tailwind of 3.6%.
The U.S. healthcare division also performed well, reporting revenues of $2.17 billion, an increase from $1.93 billion in the same quarter of the previous year. Looking ahead, Walgreens maintains its projection for adjusted EPS in the range of $1.40 to $1.80 for fiscal 2025. The company expects to see reduced contributions from sale-leaseback transactions and from its investment in drug wholesaler Cencora, in which Walgreens holds a 10.3% stake.
According to the Capital IQ consensus, the normalized EPS is estimated to be $1.54, reflecting market expectations. Chief Financial Officer Manmohan Mahajan highlighted the company’s priorities for fiscal 2025, stating, "Our primary aim is to stabilize our core performance while achieving progress on long-term strategic and operational improvements." Although the results from the first quarter are promising, the guidance remains conservative, factoring in the challenging conditions of the U.S.
retail environment. Moreover, Walgreens has adjusted its forecast for retail same-store sales, now expecting a decline of 4% to 5% for the current fiscal year—compared to previous expectations of a 2% to 3% decline, as communicated to analysts by Mahajan. Price: 11.40, Change: +2.18, Percent Change: +23.64.