Exchange: NASDAQ | Sector: Healthcare | Industry: Medical Pharmaceuticals
Q1 2025
Published: Jan 10, 2025
Earnings Highlights
Revenue of $39.46B up 7.5% year-over-year
EPS of $-0.31 increased by 299.5% from previous year
Gross margin of 17.2%
Net income of -265.00M
""The cornerstone of our turnaround is stabilizing the US retail pharmacy business... we're currently exceeding historical script retention rates."" - Tim Wentworth, CEO
In the first quarter of fiscal 2025, Walgreens Boots Alliance Inc (WBA) reported a revenue increase of 6.9% year-on-year on a constant currency basis, totaling $39.46 billion. Despite these positive results, the company faced significant operational challenges, reflected in a net loss of $265 million and a diluted EPS of -$0.31. During the earnings call, CEO Tim Wentworth indicated progress in key areas of financial and operational strategy, specifically in cost management and pharmacy services, while expressing caution about consumer pressures and evolving retail dynamics. Walgreens is focused on optimizing its store footprint to enhance profitability and re-aligning its reimbursement strategies amid a changing healthcare landscape.
Key Performance Indicators
Revenue
39.46B
QoQ: 5.09% | YoY:7.50%
Gross Profit
6.78B
17.18% margin
QoQ: 8.41% | YoY:0.13%
Operating Income
-236.00M
QoQ: -75.84% | YoY:505.13%
Net Income
-265.00M
QoQ: -91.18% | YoY:295.52%
EPS
-0.31
QoQ: -91.09% | YoY:299.48%
Revenue Trend
Margin Analysis
Key Insights
**Revenue:** $39.46 billion, up 6.9% YoY
**Net Income:** -$265 million, with a net income ratio of -0.67%
**EBITDA:** -$236 million, indicating challenges in operational efficiency
**Gross Profit:** $6.78 billion; gross profit margin at 17.2%
**EPS (Diluted):** -$0.31, reflecting significant operational challenges compared to previous periods
Financial Highlights
### Key Financial Metrics for Q1 2025:
- Revenue: $39.46 billion, up 6.9% YoY
- Net Income: -$265 million, with a net income ratio of -0.67%
- EBITDA: -$236 million, indicating challenges in operational efficiency
- Gross Profit: $6.78 billion; gross profit margin at 17.2%
- EPS (Diluted): -$0.31, reflecting significant operational challenges compared to previous periods
These metrics highlight both the growth potential in pharmacy services and the underlying weaknesses in retail sectors, exacerbated by consumer behavior shifts and market dynamics.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
39.46B
7.50%
5.09%
Gross Profit
6.78B
0.13%
8.41%
Operating Income
-236.00M
505.13%
-75.84%
Net Income
-265.00M
295.52%
-91.18%
EPS
-0.31
299.48%
-91.09%
Key Financial Ratios
currentRatio
0.64
grossProfitMargin
17.2%
operatingProfitMargin
-0.6%
netProfitMargin
-0.67%
returnOnAssets
-0.34%
returnOnEquity
-2.37%
debtEquityRatio
2.75
operatingCashFlowPerShare
$-0.16
freeCashFlowPerShare
$-0.49
dividendPayoutRatio
-81.5%
priceToBookRatio
0.7
priceEarningsRatio
-7.35
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Management Insights:
- Cost Management and Footprint Optimization: Tim Wentworth stated, "We are executing against our long-term strategic priorities... currently exceeding historical script retention rates and have retained the majority of store and pharmacy team members."
- Pharmacy Services Performance: The CEO noted, "Pharmacy comp sales increased 12.7% driven by brand inflation and script volume..." adding that they intend to pursue greater operating leverage in pharmacy operations.
- Retail Challenges: Management acknowledged a robust decline in retail sales, attributed largely to a lower incidence of respiratory illnesses and changing consumer behavior, stating, "...the warmer season impacted our first-quarter results with reduced respiratory incidences..."
"The cornerstone of our turnaround is stabilizing the US retail pharmacy business... we're currently exceeding historical script retention rates."
— Tim Wentworth, CEO
"As we improve operating performance over time, that's gonna have an impact on our cash flow generation, we remain committed to achieving a retail pharmacy-led turnaround underpinned by a sustainable economic model."
— Manmohan Mahajan, CFO
Forward Guidance
Walgreens has reaffirmed its adjusted EPS guidance for fiscal 2025 to be between $1.40 to $1.80, anticipating a more challenging retail environment with expected comp sales declines of 4-5%. Management plans to implement aggressive cost management strategies including a significant footprint optimization with over 450 planned store closures, focused on enhancing operational efficiency and stabilizing the core performance. Investors should keep an eye on key metrics such as pharmacy script retention and overall operational cash flow progress as indicators of ongoing trends.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
WBA Focus
17.18%
-0.60%
-2.37%
-7.35%
PETS
23.90%
6.45%
4.01%
5.52%
BIMI
52.90%
18.20%
-11.60%
-59.60%
YI
5.91%
0.11%
2.33%
-138.17%
CJJD
20.50%
-3.12%
-5.30%
-2.66%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Given Walgreens Boots Alliance’s strategic focus on stabilizing pharmacy operations, enhancing its footprint, and pivoting towards health and wellness offerings, the medium to long-term outlook remains cautiously optimistic. However, investors should be aware of the immediate risks and challenges posed by weakening retail performance and the broader healthcare landscape, which could impact profitability in the near term. Monitoring the effectiveness of cost management initiatives and operational performance recovery will be critical for investment decisions.
Key Investment Factors
Growth Potential
With a 6.9% YoY revenue growth led by the pharmacy segment, Walgreens demonstrates significant growth opportunities due to increased consumer demand for pharmacy services and strategic operational initiatives.
Profitability Risk
The primary risks include ongoing pressures from a challenging retail environment, adverse consumer behaviors, and the impact of reduced margins in pharmacy due to reimbursement pressures. Additionally, the need for restructuring may lead to short-term operational disruptions.
Financial Position
Despite losses, Walgreens has shown resilience in its balance sheet management through focused actions on reducing lease obligations and optimizing capital expenditures, which will support longer-term financial health.
SWOT Analysis
Strengths
Strong presence in both US and international pharmacy services
Growing digital and omnichannel capabilities
Established brand reputation in healthcare and pharmacy
Weaknesses
Ongoing losses reflected in net income and negative EPS
Challenges in retail sales due to consumer behavioral shifts
High operational costs in the retail segment
Opportunities
Expansion in health and wellness product offerings
Increased demand for at-home healthcare services
Optimization of store footprint to improve efficiency
Threats
Intensifying competition in the pharmacy and healthcare sectors