Walgreens Boots Alliance Inc (WBA) Q4 2024 Earnings Call Highlights: Navigating Challenges and ...
Adjusted EPS: $0.39, decreased 41% year-over-year on a constant currency basis.
GAAP Net Loss: $8.6 billion compared to a loss of $3.1 billion in fiscal '23.
Comparable Sales (U.S. Retail Pharmacy): Increased 8.3% year-on-year.
Pharmacy Comp Sales: Increased 11.7% driven by brand inflation and mix impacts.
Comparable Retail Sales (U.S.): Declined 1.7% in the quarter.
Boots UK Comp Retail Sales: Increased 6% with continued market share gains.
U.S. Healthcare Segment Sales: $2.1 billion, increased 7% compared to the prior year quarter.
Operating Cash Flow: $1 billion for fiscal '24.
Free Cash Flow: $23 million, declined by $642 million versus the prior year.
Net Debt Reduction: Nearly $2 billion in fiscal '24.
Store Closures: Plan to close approximately 1,200 stores over the next three years.
Release Date: October 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Walgreens Boots Alliance Inc (NASDAQ:WBA) successfully cut costs by over $1 billion, reduced CapEx by over $700 million, and realized over $600 million in benefits from working capital initiatives, contributing to positive cash flow in the fourth quarter.
The company achieved a net debt reduction of $1.9 billion in fiscal 2024, strengthening its balance sheet.
Walgreens Boots Alliance Inc (NASDAQ:WBA) plans to invest in profitable stores, with over 6,000 out of 8,000 stores being profitable, supporting its retail pharmacy-led model.
The company launched over 300 new own brand SKUs in fiscal 2024 and plans to launch another 300 plus in fiscal 2025, focusing on health and wellness categories.
Walgreens Boots Alliance Inc (NASDAQ:WBA) exceeded its goal of $1 billion in cost savings for the year, with most benefits recognized in the U.S. Retail Pharmacy segment.
Negative Points
Adjusted EPS of $0.39 decreased 41% year-over-year on a constant currency basis, with significant declines in U.S. Retail Pharmacy performance.
The company plans to close approximately 1,200 underperforming stores over the next three years, which may impact its market presence.
Walgreens Boots Alliance Inc (NASDAQ:WBA) faces ongoing pressure on reimbursement rates in the U.S. Pharmacy segment, impacting pharmacy margins.
GAAP net loss was $8.6 billion compared to a loss of $3.1 billion in fiscal '23, including non-cash impairment charges and opioid-related claims.
Comparable retail sales in the U.S. declined 1.7% in the quarter, driven by sales pressure in non-essential categories.
Q & A Highlights
Q: Can you elaborate on the restructuring of reimbursement rates and the potential for improving rates in 2025? Are there plans to leave some networks if necessary? A: Tim Wentworth, CEO, explained that for 2025, there is a lessening of reimbursement pressure, continuing a trend where payers are becoming more realistic about what can be given. The company is open to making difficult decisions, including leaving networks if fair compensation isn't achieved. The goal is to reset the framework for reimbursement discussions over a 2-3 year period.
Q: What is the expected impact of store closures on the U.S. Pharmacy business in fiscal 2025? A: Manmohan Mahajan, CFO, stated that the store closures are expected to contribute approximately $100 million to AOI in fiscal 2025. The benefits will continue to scale into 2026 and 2027 as more locations are closed.
Q: How does the company plan to stabilize its financial performance and improve free cash flow in fiscal 2025? A: Manmohan Mahajan, CFO, highlighted that the company plans to focus on working capital optimization, expecting to generate approximately $500 million in free cash flows, and reduce capital expenditures by about $150 million. The company will also continue to monetize non-core assets to improve its balance sheet.
Q: What are the plans for VillageMD and its role in the company's strategy? A: Tim Wentworth, CEO, mentioned that the goal is to monetize VillageMD without destroying value. The process has been longer than expected, but the company is focused on preserving value and ensuring a smooth transition. VillageMD is not considered a crucial part of Walgreens' future strategy.
Q: How does the company view its dividend policy in light of its focus on deleveraging and improving free cash flow? A: Tim Wentworth, CEO, stated that the company has adopted a flexible and pragmatic capital allocation strategy. While there is no immediate news on changes to the dividend, the company will continue to evaluate its capital allocation, including aligning the dividend with long-term earnings power if necessary.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.