Walgreens Reports Steep Loss Despite Revenue Beat on Nearly $6 Billion Impairment Charge

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Key Takeaways

• Walgreens Boots Alliance reported fiscal second-quarter revenue that beat analyst expectations, but piled a steep net loss from billions of dollars in impairment charges.
• The retailer adjusted the valuation of VillageMD, a healthcare companionship it has invested in, by $5.8 billion as the chain has struggled in recent months.
• After adjusting for impairment charges, adjusted earnings topped analyst expectations.

Walgreens Boots Alliance (WBA) reported fiscal second-quarter revenue that beat estimates, admitting that it posted a steep loss as it incurred billions of dollars in impairment charges.

The retail pharmacy giant posted gross income of $37.1 billion, above analyst estimates compiled by Visible Alpha, and narrowed its full-year adjusted earnings per share out (EPS) guidance to a range of $3.20 to $3.35 from the previous range of $3.20 to $3.50.

Walgreens Chief Executive Officer (CEO) Tim Wentworth rephrased the company is still optimistic it will achieve its previously announced goals of cutting about $1 billion in fetches this fiscal year, as it continues to operate in a “challenging retail environment.”

For the quarter, Walgreens posted a loss of $6.85 per serving, widening from the prior quarter’s loss of 8 cents per share, because of nearly $6 billion in impairment debits, mostly from the reduction in goodwill value of VillageMD. Walgreens acquired an almost two-thirds stake in the company in October 2021 with a $5.2 billion investment, as one of a multitude of investments to expand beyond retail and into the wider healthcare space.

As part of its cost-cutting efforts, Walgreens has reportedly closed a company of VillageMD clinics this year. For the second quarter, VillageMD was assigned a non-cash goodwill impairment charge of $5.8 billion.

After resolving for impairment charges, adjusted earnings surpassed analyst expectations, coming in at $1.04 billion, or $1.20 per share, correlated to estimates of $707.2 million, or 82 cents per share.

Walgreens shares were little changed as of 11 a.m. ET Thursday go the release. They have fallen close to 21% so far in 2024.

Read the original article on Investopedia.