$WBA

Walgreens just held their Q1 2025 Earnings Call.

A recap for $WBA investors: 👇👇👇

Financial Performance:
- EPS of $0.51 (beat estimates by $0.13)
- Revenue of $39.46B (up 7.50% Y/Y, beat by $2.04B)
- Pharmacy comparable sales grew 12.7%
- Retail comparable sales declined 4.6%

Key Strategic Updates:
1. Store Optimization Progress:
- Closed ~70 stores in Q1, with plans to close ~450 more stores in FY2025
- Strong script retention at closed stores, exceeding historical rates
- Retained stores outperforming closing stores by 250bps in front-end sales and 390bps in pharmacy scripts

2. Pharmacy Business:
- Completed all pharmacy contract negotiations for calendar 2025
- Making progress on rebalancing brand/generic reimbursements
- Successfully creating new categories for high-cost drugs like GLP-1s
- Micro-fulfillment centers now serving 4,800 stores (23% volume increase YoY, 13% lower cost to fill)

3. Retail Challenges:
- Front-end business facing headwinds from reduced consumer spending
- Warm weather and 40% lower respiratory illness impacted sales
- Launching new categories (superfoods, sports nutrition, women's wellness)
- Increasing private label penetration (up 75bps to 17.8%)

4. Healthcare Segment:
- Strong performance from VillageMD despite clinic closures
- Shields revenue up 30% with strong client renewals
- Sale process for VillageMD ongoing

5. Financial Outlook:
- Maintained FY2025 adjusted EPS guidance of $1.40-$1.80
- Revised retail comp sales forecast to -4% to -5% (previously -2% to -3%)
- Working on improving cash flow generation and reducing debt
- Making progress on $500M working capital initiatives

*** KEY QUOTES ***🗣️🗣️🗣️

1. On pharmacy contract negotiations (from CEO Tim Wentworth):
"We've had success in adjusting contract dynamics in our negotiations with our commercial Medicare and Medicaid plans, such as rebalancing brands and generics and carving out new categories for high-cost drugs, all in response to the evolving needs of customers and to better align reimbursement with our cost of goods."

2. On store closure performance:
"Currently, we see comparable front end sales in our retained store fleet outperforming those stores slated to close this year by approximately 250 basis points and comparable pharmacy scripts by approximately 390 basis points."

3. On micro-fulfillment center progress:
"Our MFCs currently serve about 4,800 stores, and shipped volumes from these centers are up 23% year-on-year, while cost to fill is down by 13%. These improvements allow our pharmacists to spend more time on patient care and clinical services, expanding the critical role they provide."

Sentiment Analysis: Cautiously optimistic sentiment from management, who demonstrated confidence in their pharmacy contract negotiations, operational improvements, and healthcare segment while being transparent about ongoing retail challenges and consumer spending headwinds. Analysts appeared receptive to the progress on key strategic initiatives but maintained healthy skepticism about the timeline for full turnaround, particularly regarding retail performance and cash flow stabilization.

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