Walgreens Boots Alliance’s improving retail pharmacy business and company comments … [+]
Walgreens improving its retail pharmacy operations and comments from the company’s CEO are convincing Wall Street that the drugstore chain is unlikely to be headed for a private equity takeover.
The fiscal first quarter earnings results announced Friday, which showed a wider net loss than a year ago but several operational improvements across the business, come after a three-line report a month ago in the Wall Street Journal that Walgreens is considering a sale to a private equity firm Sycamore Partners.
Walgreens continues to discount that report and says executives do not comment on rumors or speculation. The potential for a buyout wasn’t even discussed by Walgreens CEO Tim Wentworth on a call with Wall Street analysts and investors on Friday.
“In U.S. pharmacy, we maintained our market share in scripts, our international business continued to deliver strong returns and our U.S. healthcare segment contributed somewhat above expectations, thanks to a combination of revenue growth and cost control,” Wentworth said on a call Friday with analysts and investors. after releasing earnings for the company’s first quarter, which ended on November 30 last year. “Importantly, we have made progress on the opportunities we consider essential to our longer-term turnaround.”
Analysts who follow Walgreens now see it Friday’s jump in the company’s share price of more than 25%, giving the company more market value and making it less likely that private equity will be able to afford the iconic drugstore chain.
“While neither the solid earnings nor rising shares accelerate our expected timeline for Walgreens’ eventual turnaround, we do believe continued execution of the footprint optimization plan and a more consistent readout of stable performance will support the beleaguered stock going forward should keep lifting,” Keonhee Kim, equity analyst at Morningstarwrote in a report issued Friday after Walgreens released its earnings report. “After an extended period of volatility, we believe Walgreens still needs a few more quarters of strong execution on its strategy to gain investor confidence, but we believe patient long-term investors can reap the significant upside from our medium-term fair value estimate realize. term.”
In fairness, Walgreens expects to accelerate the pace of store closures, part of its “optimization plan,” while continuing the process of selling its stake in the VillageMD primary care business, which already has several billion dollars in sales for the company. dollars has cost.
“In terms of store closures, we mentioned about 70 stores in the quarter, but for the full year we are on track and prepared for close to 450 more,” Wentworth told analysts of the plan to close about 1,200 over the next three years close shops.
Meanwhile, analysts think Walgreens is turning the corner without the help of private equity.
“Walgreens’ first-quarter 2025 earnings report confirms that the company’s turnaround is officially underway after an incredibly difficult 2024, in which it finished as the S&P’s worst-performing stock of the year.” Emarketer analyst Rajiv Leventhal said Friday. “And CEO Tim Wentworth’s comments about his commitment to a retail pharmacy-led business model that will drive long-term value indicate that the rumored sale to PE firm Sycamore Partners is less likely.”
Mizuho Securities USA analyst Ann Hynes was also impressed with Walgreens’ performance “across the pharmaceutical, healthcare and international segments.” But she cautioned that the company still faces weak retail sales that “remain a headwind for the business.”
“We believe the quarter is above conservative investor expectations as WBA continues to navigate its debt wall in 2025,” Hynes said Friday.