The company reported a quarterly loss as it prepares to be acquired and transformed by the private equity firm.
Better-than-expected fiscal results in the third quarter couldn’t keep Walgreens from swinging to a loss for the period.
Strong retail pharmacy and international growth helped buoy earnings, but continued weakness in front-of-store sales kept investor sentiment in check as the company inches closer to being taken private by Sycamore Partners.
Sales for the quarter reached $39 billion, up 7.2% year-over-year and ahead of analysts’ expectations. That momentum was largely powered by its U.S. retail pharmacy business, which saw revenue grow 7.8% to $30.7 billion, while the company’s international segment also achieved nearly 8% growth to $6.2 billion.
Still, profitability didn’t follow as Walgreens reported a net loss of $175 million, a fall off from the $344 million surplus experienced in the same period last year.
The U.S. healthcare segment, which includes the company’s investments in VillageMD and other clinical services, saw sales slip by $23 million to $2.1 billion, highlighting Walgreens challenges in delivering direct care. The company previously announced the closure of underperforming VillageMD clinics, which suffered a 6.5% dip in sales in the third quarter.
“Third quarter results reflect continued improvement in our U.S. Healthcare segment and benefits from our cost savings initiatives, while we continued to see weakness in our U.S. front-end sales,” Walgreens CEO Tim Wentworth said in a statement. “We remain focused on our turnaround plan, which will require time, disciplined focus and a balanced approach to manage future cash needs with investments necessary to navigate an evolving pharmacy and retail environment.”
Walgreens’ third-quarter performance comes ahead of its $10 billion sale to private equity firm Sycamore Partners, expected to close by the end of 2025. The looming transaction has created uncertainty over the company’s long-term strategy and was cited by Walgreens as a reason for suspending full-year guidance.
The upcoming privatization offers the company an opportunity for a strategic reset and will key to watch as Walgreens charts its next act.
Jay Asser is the CEO editor for HealthLeaders.
KEY TAKEAWAYS
Walgreens reported $39 billion in third quarter sales, up 7.2% and driven by strong pharmacy and international growth.
The company posted a $175 million net loss, citing weak front-end retail and headwinds that are affecting retail pharmacies.
Full-year guidance was suspended amid uncertainty ahead of a $10 billion privatization deal with Sycamore Partners.