Fourth-quarter sales were up 6% year-over-year, reaching $37.5 billion, but the company still posted a net loss of $3.0 billion compared to a loss of $180 million in the same period last year. Walgreens reported that its U.S. retail pharmacy segment was especially impacted by declining margins due to reimbursement pressures and fewer one-time financial boosts, such as the sale-leaseback gains from prior years.
In a move to stabilize its business, CEO Tim Wentworth announced a footprint optimization plan that includes closing 1,200 stores by 2027, with 500 closures expected by the end of fiscal 2025. "This is part of our strategy to reduce costs and refocus on high-performing locations,” Wentworth said, adding that the closures are expected to be immediately accretive to adjusted earnings per share.
Heavy Losses Linked to Opioid Liabilities and Impairment Charges
The massive loss for fiscal 2024 was driven by several major non-cash charges, including a $2.3 billion valuation allowance on deferred tax assets tied to opioid liabilities and a $12.4 billion impairment of goodwill related to Walgreens' investment in VillageMD. These impairments reflect the financial burden that Walgreens continues to face from opioid-related legal claims, as well as the changing landscape of healthcare services.
Adjusted earnings per share for the fiscal year were $2.88, down nearly 28% from the previous year. Walgreens attributed this to multiple factors, including the pressure on retail pharmacy margins, a tougher reimbursement environment, and fewer financial boosts from one-time gains.
Focus on U.S. Healthcare Segment and Cash Flow Improvements
Despite the losses, Walgreens saw some success in its U.S. Healthcare segment, which reported adjusted EBITDA growth of $442 million for the year. The company highlighted significant growth in its VillageMD and Shields Health Solutions units, which helped improve overall profitability in the healthcare division.
Walgreens also reported a net debt reduction of $1.9 billion for fiscal 2024 and exceeded its $1 billion cost-saving target. These achievements, along with reducing capital expenditures by $600 million, demonstrate the company’s focus on improving cash flow amid ongoing financial challenges.
Looking ahead to fiscal 2025, Walgreens projects adjusted EPS to fall between $1.40 and $1.80, as growth in healthcare and international segments will likely be outweighed by continued declines in its U.S. retail pharmacy business.
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Tom Robinson
1d ago
The bigger stores are cheaper on prescriptions. And, the Dollar Stores are cheaper on the other stuff.
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