Walgreens Boots Alliance (WBA) reported its fiscal 2025 third quarter results, revealing significant financial dynamics amid ongoing strategic transformation and a pending acquisition by Sycamore Partners. The quarter ended May 31, 2025, showcased a complex interplay of growth, cost management, and impairment charges, reflecting both challenges and progress in WBA’s turnaround plan.
Sales Growth: WBA’s third quarter sales rose 7.2% year-over-year to $39.0 billion, or 6.9% on a constant currency basis, driven by growth in U.S. Retail Pharmacy and International segments.
Operating Income: Operating income declined to \(53 million from \)111 million in the prior year quarter, impacted by a non-cash impairment charge on long-lived assets.
Adjusted Operating Income: Adjusted operating income decreased 9% to $558 million, reflecting higher incentive accruals, lower U.S. retail sales, and reduced equity earnings in Cencora, partially offset by cost savings.
Net Earnings: WBA reported a net loss of \(175 million, a sharp decline from net earnings of \)344 million in the year-ago quarter, primarily due to prior year gains and higher current tax expenses.
Adjusted Net Earnings: Adjusted net earnings fell 39.3% to $334 million on a constant currency basis.
Earnings Per Share: Loss per share was \(0.20 compared to earnings per share of \)0.40 in the prior year, with adjusted EPS down 39.6% to $0.38.
Cash Flow: Operating cash flow was \(584 million, slightly down from \)605 million, with free cash flow stable at $336 million.
U.S. Retail Pharmacy: Sales increased 7.8% to \(30.7 billion, with pharmacy sales up 11.8%, driven by branded drug inflation and mix. However, retail sales declined 5.3%, affected by the Footprint Optimization Program and weaker categories like grocery and beauty. Adjusted operating income dropped 30.2% to \)350 million.
International: Sales grew 7.8% to \(6.2 billion, with Boots UK and Germany showing strong performance. Adjusted operating income rose 22% to \)214 million.
U.S. Healthcare: Sales slightly declined to \(2.1 billion, with VillageMD sales down 6.5%. Operating loss improved to \)64 million from \(220 million, with adjusted operating income turning positive at \)54 million.
WBA’s fiscal 2025 results reflect ongoing efforts to stabilize and grow its core pharmacy business while managing costs and restructuring. The company faces challenges from legal settlements, including opioid-related payments totaling \(252 million in the quarter, and non-cash impairment charges totaling \)115 million.
The pending acquisition by Sycamore Partners, expected to close in late 2025, adds a layer of strategic transition, with WBA ceasing public financial guidance and preparing for privatization.
The operating margin for Q3 2024 was approximately 1.31%, indicating thin profitability typical in retail pharmacy sectors.
The debt-to-equity ratio for FY 2024 stood at 0.995, reflecting a balanced capital structure with moderate leverage.
Free cash flow for Q3 2024 was $327 million, underscoring solid cash generation despite net losses.
WBA’s focus remains on executing its turnaround plan, balancing cost savings with necessary investments in pharmacy and healthcare services. The company must navigate economic uncertainties, regulatory challenges, and evolving healthcare dynamics, including reimbursement models and competitive pressures.
Previous earnings calls emphasized the importance of cost management, pharmacy growth, and healthcare segment expansion. The current 8-K results align with these themes, highlighting progress in U.S. Healthcare and cost savings, tempered by retail sales softness and legal expenses.
Walgreens Boots Alliance’s Q3 fiscal 2025 results present a nuanced picture of a company in transition. While sales growth and healthcare segment improvements are positive, profitability pressures and legal costs weigh on earnings. The upcoming acquisition by Sycamore Partners marks a significant milestone, potentially reshaping WBA’s strategic trajectory.
For investors and analysts, monitoring WBA’s execution of its turnaround strategy and integration post-acquisition will be critical.