The improving retail pharmacy business of Walgreens Boots Alliance and comments from the company’s … [+]
Walgreens improving retail pharmacy business and comments from the company’s chief executive are convincing Wall Street that the drugstore chain is unlikely headed for a buyout from private equity.
The fiscal first quarter earnings unveiled Friday, which showed a wider net loss than a year ago but several operating improvements across company businesses, comes following a three-byline report a month ago in the Wall Street Journal that Walgreens is considering a sale to private equity firm Sycamore Partners.
Walgreens continues to discount that report, saying executives don’t comment on rumors or speculation. The potential for a buyout wasn’t even addressed by Walgreens CEO Tim Wentworth during a call with Wall Street analysts and investors Friday.
“In U.S. pharmacy, we maintained script market share, our international business continued to show strong returns, and our U.S. healthcare segment contributed somewhat above expectations and a combination of revenue growth and cost control,” Wentworth said on a call with analysts and investors Friday after releasing earnings for the company’s first quarter that ended November 30 of last year. “Importantly, we started to progress on the opportunities that we consider essential to our longer term turnaround.”
In the meantime, analysts who follow Walgreens see Friday’s jump in the company’s stock price of more than 25% bringing more market value to the company and making it less likely private equity can afford the iconic drugstore chain.
“While neither the solid earnings nor the surging stock expedite our expected timeline for Walgreens’ eventual turnaround, we do think a continued execution on the footprint optimization plan and a more consistent readout of stable performance should continue to lift the depressed stock going forward,” Keonhee Kim, equity analyst at Morningstar, wrote in a report issued Friday after Walgreens released its earnings report. “After a long period of volatility, we think Walgreens still needs a few more quarters of good execution on its strategy to gain investors’ trust, but we believe patient long-term investors can realize the significant upside to our fair value estimate over the medium term.”
To be sure, Walgreens expects to ramp up the pace of the store closure part of the “optimization plan” while continuing the process to sell its stake in the VillageMD primary care company that has already cost the company several billion dollars.
“As it relates to the store closures, we mentioned 70 or thereabouts in the quarter but for the full year, on track and prepared for another almost 450,” Wentworth told analysts of the plan to close about 1,200 stores over the next three years.
Meanwhile, analysts believe Walgreens is turning the corner without the help of private equity.
“Walgreens’ Q1 2025 earnings report solidifies that the company’s turnaround is officially underway following an incredibly difficult 2024 where 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 on being committed to a retail pharmacy-led operating 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, too, was impressed with Walgreens performance “across its pharmacy, healthcare, and international segments.” But she cautioned the company still faces soft retail sales that “continue to be a headwind to the company.”
“We believe the quarter is above investors’ conservative expectations as WBA continues to navigate its debt wall in 2025,” Hynes said Friday.
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