Walgreens' Turnaround Takes Shape in Midst of Significant Q1 Losses

The retail pharmacy giant's financial recovery "will take time," CEO Tim Wentworth cautioned to investors.

Walgreens' first quarter earnings beat Wall Street expectations, signaling that the company is heading in the right direction after falling into financial turmoil.

The retail pharmacy operator logged a net loss of $265 million in the quarter, compared to a loss of $67 million a year ago, but also saw its sales increase by 7.5% over the same period in 2024 to $39.5 billion.

CEO Tim Wentworth stated that the results were driven by the stabilization of its core retail pharmacy business, along with managing operating costs and addressing reimbursement models.

"Our first quarter results demonstrate that we are executing against our long-term strategic priorities," Wentworth told investors on an earnings call.

Walgreens, like other companies in the retail pharmacy space, has struggled with challenges related to low reimbursement and dampened consumer demand. The company's financial troubles have been heightened by the losses it has been incurring with its primary and specialty care offerings.

With its market value recently dipping under $8 billion after exceeding $100 billion in 2015, Walgreens is reportedly considering a sale to private equity firm Sycamore Partners, according to the Wall Street Journal.

In the meantime, the company has found enough of a footing with its finances to provide reason for optimism going forward.

"While we are pleased with our first quarter results, there is more work to be done as we aim to strengthen our balance sheet and to ensure longer-term positive cash flow generation," Wentworth said. "We remain committed to achieving a retail pharmacy-led turnaround, underpinned by a sustainable economic model. Our turnaround will take time, but as the quarter's results demonstrate, we are executing with urgency and believe the actions we're taking will be the basis for sustained value creation over the long term."

One area Walgreens has made headway is with its reimbursement models. Wentworth told investors that the company has completed all its contract negotiations for calendar 2025 and had success in adjusting contracts to better align reimbursement with cost of goods.

"We are also expanding discussions about being compensated for additional services beyond dispensing and promoting alternative payment models," Wentworth said.

In terms of managing its footprint and costs, Walgreens closed 70 stores in the first quarter and plans to close another 450 for the year.

The company has been shrinking the presence of VillageMD clinics as well while it explores selling part or all of the primary care business. In the second quarter of last year, Walgreens reported nearly $6 billion in net loss from its investment.

However, VillageMD's sales have trended up, leading to a 9% year-over-year growth in the first quarter to $1.6 billion.

"We are underway with a sale process for Village Medical while continuing to evaluate the best options for Summit-CityMD," Wentworth said. "We are encouraged by the leadership of new CEO, healthcare veteran Jim Murray. To be clear, our ultimate intent to exit is unchanged, and we remain committed to redeploying any proceeds to reduce our net debt and improve the health of our balance sheet."

The improved performance of VillageMD and Shields allowed Walgreens to bring its operating loss in the U.S. healthcare segment down to $325 million in the first quarter, compared to $436 million last year.