Walgreens Boots Alliance Reports Fiscal 2025 Third Quarter Results

Third quarter financial results

• Third quarter loss per share¹ was $0.20 compared to earnings per share of $0.40 in the year-ago quarter. The decline in earnings per share was primarily driven by prior year after-tax gains related to fair value adjustments on variable prepaid forward derivatives and a partial sale of the Company's equity method investment in Cencora, and higher tax expense in the current quarter.
• Adjusted earnings per share (EPS)² was $0.38 compared to adjusted EPS² of $0.63 in the year-ago quarter. The decline in adjusted EPS² was primarily driven by a higher adjusted effective tax rate², higher incentive accruals, lower U.S. retail sales and lower equity earnings in Cencora, partly offset by cost savings within U.S. Retail Pharmacy.
• Third quarter sales increased 7.2 percent year-over-year to $39.0 billion, up 6.9 percent on a constant currency basis.

Fiscal 2025 guidance

• Given the pending transaction, pursuant to which WBA will be acquired by entities affiliated with Sycamore Partners, the company previously withdrew fiscal 2025 guidance.

DEERFIELD, Ill.--(BUSINESS WIRE)--Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced financial results for the third quarter of fiscal 2025, which ended May 31, 2025.

Chief Executive Officer Tim Wentworth said:

“Third quarter results reflect continued improvement in our U.S. Healthcare segment and benefits from our cost savings initiatives, while we continued to see weakness in our U.S. front-end sales. We remain focused on our turnaround plan, which will require time, disciplined focus and a balanced approach to manage future cash needs with investments necessary to navigate an evolving pharmacy and retail environment.”

Overview of Third Quarter Results

WBA third quarter sales increased 7.2 percent from the year-ago quarter to $39.0 billion, an increase of 6.9 percent on a constant currency basis, reflecting sales growth in the U.S. Retail Pharmacy and International segments.

Third quarter operating income was $53 million compared to an operating income of $111 million in the year-ago quarter. Third quarter operating income included a non-cash impairment charge related to certain long-lived assets.

Adjusted operating income² was $558 million compared to adjusted operating income² of $613 million in the year-ago quarter. Operating income and adjusted operating income² reflect higher incentive accruals, lower U.S. retail sales and lower equity earnings in Cencora, partly offset by growth in U.S. Healthcare and cost savings within U.S. Retail Pharmacy.

Net loss in the third quarter was $175 million, a decrease of $519 million compared to net earnings of $344 million in the year-ago quarter. The decline in net earnings was primarily driven by prior year after-tax gains related to fair value adjustments on variable prepaid forward derivatives and a partial sale of the Company's equity method investment in Cencora, and higher tax expense in the current quarter.

Adjusted net earnings² in the third quarter was $334 million, a decrease of $211 million compared to adjusted net earnings² of $545 million in the year-ago quarter, down 39.3 percent on a constant currency basis. The decline in adjusted net earnings² reflects a higher adjusted effective tax rate², higher incentive accruals, lower U.S. retail sales and lower equity earnings in Cencora, partly offset by cost savings within U.S. Retail Pharmacy.

Loss per share in the third quarter was $0.20 compared to earnings per share of $0.40 in the year-ago quarter. Adjusted EPS² was $0.38 compared to adjusted EPS² of $0.63 in the year-ago quarter, reflecting a decrease of 39.6 percent on a constant currency basis.

Net cash provided by operating activities was $584 million in the third quarter, a $20 million decrease compared with the year-ago quarter. Operating cash flow in the current quarter was negatively impacted by $252 million of legal payments primarily related to opioid-related settlements. Free cash flow² was positive $336 million, a $2 million improvement compared to the year-ago quarter. Operating cash flow and free cash flow² reflect improvements in working capital, lower cash taxes and lower interest paid, partly offset by higher legal payments.

Overview of Fiscal 2025 Year-to-Date Results

Sales in the first nine months of fiscal 2025 increased 6.3 percent from the year-ago period to $117.0 billion, an increase of 6.2 percent on a constant currency basis, primarily reflecting sales growth in the U.S. Retail Pharmacy and International segments.

Operating loss in the first nine months of fiscal 2025 was $5.8 billion compared to an operating loss of $13.1 billion in the year-ago period. Operating loss in the current period included a $3.0 billion non-cash impairment charge related to VillageMD goodwill and other long-lived assets, which resulted in a $1.9 billion charge attributable to WBA, net of tax and non-controlling interest, and a $2.4 billion non-cash impairment charge attributable to WBA, net of tax, primarily related to U.S. Retail Pharmacy goodwill. Operating loss in the year-ago period included a $12.4 billion non-cash impairment charge related to VillageMD goodwill, which resulted in a $5.8 billion charge attributable to WBA, net of tax and non-controlling interest, and a $455 million non-cash impairment charge related to certain long-lived assets in the U.S. Retail Pharmacy segment.

Adjusted operating income² was $1.9 billion, compared to adjusted operating income² of $2.2 billion in the year-ago period, reflecting lower U.S. retail sales, sale-leaseback gains in the prior year period and higher incentive accruals, partially offset by growth in the U.S. Healthcare segment and cost savings within the U.S. Retail Pharmacy segment.

Net loss for the first nine months of fiscal 2025 was $3.3 billion, a decrease of 41.5 percent compared to a net loss of $5.6 billion in the year-ago period, reflecting non-cash impairment charges and fair value adjustments on variable prepaid forward derivatives, partly offset by $1.3 billion in after-tax gains on settlements of variable prepaid forward derivatives related to the monetization of Cencora shares and gains on investments in BrightSpring.

Adjusted net earnings² decreased 38.8 percent to $1.3 billion, down 38.8 percent on a constant currency basis, reflecting an adjusted effective tax benefit² in the year-ago period due to the recognition of deferred tax assets in foreign jurisdictions and lower adjusted operating income² in the current period.

Loss per share in the first nine months was $3.81 compared to loss per share of $6.53 in the year-ago period, a decrease of 41.6 percent. Adjusted EPS² was $1.52 compared to adjusted EPS² of $2.49 in the year-ago period, reflecting a decrease of 39.0 percent on a constant currency basis.

Net cash provided by operating activities was $245 million in the first nine months of fiscal 2025, a $559 million improvement compared with the year-ago period. Operating cash flow in the current period was negatively impacted by $1.4 billion of legal payments primarily related to Everly and opioid-related settlements. In the year-ago period, operating cash flow was negatively impacted by $785 million in payments related to legal matters and a $386 million Boots Pension Plan Annuity premium. Free cash flow² was negative $506 million, a $557 million improvement compared with the year-ago period. Operating cash flow and free cash flow² reflect improvements in working capital, lower cash taxes and lower interest paid, partly offset by higher legal payments. Free cash flow² also benefited from a $384 million decrease in capital expenditures.

Business Segments

U.S. Retail Pharmacy

The U.S. Retail Pharmacy segment had third quarter sales of $30.7 billion, an increase of 7.8 percent from the year-ago quarter. Comparable sales increased 10.3 percent from the year-ago quarter.

Pharmacy sales increased 11.8 percent and comparable pharmacy sales increased 14.6 percent in the quarter, each benefiting from higher branded drug inflation and mix impacts. Comparable 30-day equivalent prescriptions filled in the third quarter increased 2.7 percent from the year-ago quarter, while comparable prescriptions excluding immunizations also increased 2.7 percent. Total 30-day equivalent prescriptions filled in the quarter, including immunizations, increased 0.4 percent to 308 million.

Retail sales decreased 5.3 percent from the year-ago quarter, including the impact of the Footprint Optimization Program and lower comparable retail sales. Comparable retail sales decreased 2.4 percent and were impacted by weaker sales in grocery and household, health and wellness, and beauty.

Adjusted operating income decreased 30.2 percent to $350 million from $501 million in the year-ago quarter, reflecting higher incentive accruals, lower retail sales and lower equity earnings in Cencora, partially offset by cost savings.

International

The International segment had third quarter sales of $6.2 billion, an increase of 7.8 percent from the year-ago quarter, including a favorable currency impact of 1.9 percent. Sales increased 5.9 percent on a constant currency basis, with the Germany wholesale business growing 6.8 percent and Boots UK sales growing 5.0 percent.

Boots UK comparable pharmacy sales increased 5.4 percent on a constant currency basis compared with the year-ago quarter. Boots UK comparable retail sales increased 6.0 percent on a constant currency basis compared to the year-ago quarter. Boots.com sales grew 18.7 percent, or 14.8 percent on a constant currency basis, representing 17 percent of Boots total retail sales.

Adjusted operating income increased 22.0 percent to $214 million, an increase of 20.2 percent on a constant currency basis compared with the year-ago quarter, reflecting strong retail performance in Boots UK and market growth in Germany, partly offset by cost inflation primarily driven by payroll.

U.S. Healthcare

The U.S. Healthcare segment had third quarter sales of $2.1 billion, a decrease of $23 million. The decline in sales was primarily driven by VillageMD sales decreasing 6.5 percent, reflecting lower risk-based and fee-for-service revenue, including the impact of clinic closures. CareCentrix sales increased 11.6 percent and Shields sales increased 24.8 percent.

Operating loss was $64 million, compared to operating loss of $220 million in the year-ago quarter, reflecting lower acquisition-related amortization and higher contributions from VillageMD risk-based business.

Adjusted operating income, which excludes impairment charges, certain costs related to stock compensation expense and amortization of acquired intangible assets, was $54 million compared to a loss of $22 million in the year-ago quarter.

Adjusted EBITDA of $86 million improved by $63 million versus the prior-year quarter, reflecting improvement at VillageMD and growth at Shields.

Conference Call and Fiscal 2025 Outlook

On March 6, 2025, WBA entered into a definitive agreement to be acquired by entities affiliated with Sycamore Partners. The merger is currently expected to close in the third or fourth quarter of calendar year 2025, pending shareholder and regulatory approvals and other conditions to closing. Upon completion of the transaction, WBA common stock will no longer be listed on the Nasdaq Stock Market, and WBA will become a private company. As is customary during the pendency of such a transaction, WBA will not host a conference call and webcast or provide financial guidance for fiscal year 2025 in conjunction with this quarter’s report. In addition, WBA’s previously issued guidance for full year fiscal 2025 should no longer be relied upon. For further details on quarterly performance, please refer to WBA’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2025, which is expected to be filed today with the Securities and Exchange Commission (the "SEC").

¹ All references to net earnings or net loss are to net earnings or net loss attributable to WBA, and all references to EPS or loss per share are to diluted EPS or diluted loss per share attributable to WBA.

² "Adjusted," "constant currency" and free cash flow amounts are non-GAAP financial measures. Measures identified as "comparable" constitute key performance indicators. See the appendix to this release for a discussion of non-GAAP financial measures, including a reconciliation to the most closely correlated GAAP measure, and key performance indicators.

³ The Company uses Adjusted operating income (loss) as its principal measure of segment performance as it enhances the Company’s ability to compare past financial performance with current performance and analyze underlying segment performance and trends. The consolidated WBA measure is not determined in accordance with GAAP and should not be considered a substitute for, or superior to, the most directly comparable GAAP measure, consolidated operating income. See the appendix to this release for a discussion of non-GAAP financial measures, including a reconciliation to the most closely correlated GAAP measure.

Cautionary Note Regarding Forward-Looking Statements: This release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These include, without limitation, estimates of and goals for future operating, financial and tax performance and results, including the impact of opioid related claims and litigation settlements, our long-term outlook and targets and related assumptions and drivers, as well as forward-looking statements concerning the expected execution and effect of our business strategies, including the breadth, timing and impact of the actions related to our strategic review, uncertainties related to the announcement and completion of the proposed merger, including: (i) the risk that the proposed transaction may not be completed in a timely manner or at all; (ii) the ability of affiliates of Sycamore Partners to obtain the necessary financing arrangements set forth in the commitment letters received in connection with the proposed transaction; (iii) the failure to satisfy any of the conditions to the consummation of the proposed transaction, including the receipt of certain regulatory approvals and stockholder approval; (iv) the occurrence of any event, change or other circumstance or condition that could give rise to the termination of the transaction agreements, including in circumstances requiring the Company to pay a termination fee; (v) the effect of the announcement or pendency of the proposed transaction on the Company’s business relationships, operating results and business generally; (vi) the risk that the proposed transaction disrupts the Company’s current plans and operations; (vii) the Company’s ability to retain and hire key personnel and maintain relationships with key business partners and customers, and others with whom it does business; (viii) risks related to diverting management’s attention from the Company’s ongoing business operations; (ix) significant or unexpected costs, charges or expenses resulting from the proposed transaction; (x) potential litigation relating to the proposed transaction that could be instituted against the parties to the transaction agreements or their respective directors, managers or officers, including the effects of any outcomes related thereto; (xi) uncertainties related to the continued availability of capital and financing and rating agency actions; (xii) certain restrictions during the pendency of the proposed transaction that may impact the Company’s ability to pursue certain business opportunities or strategic transactions; (xiii) uncertainty as to timing of completion of the proposed transaction; (xiv) the risk that the holders of Divested Asset Proceed Rights will receive less-than-anticipated payments or no payments with respect to the Divested Asset Proceed Rights after the closing of the proposed transaction and that such rights will expire valueless; (xv) the impact of adverse general and industry-specific economic and market conditions; (xvi) the possibility that alternative transaction proposals will or will not be made; (xvii) though no such transactions existed, the possibility that, if the Company did not enter into the transaction agreements, it potentially could have, at a later date, attempted to engage in other, unspecified transactions, including restructuring efforts, special dividends or the sale of some or all of the Company’s assets that may have produced a higher aggregate value than that available to the Company’s stockholders in the merger; and (xviii) the risk that the Company’s stock price may decline significantly if the merger is not completed; our ability to successfully turn around the business and return to growth, our ability to reverse valuation allowances on deferred tax assets, the potential impacts on our business of COVID-19, the impact of adverse global macroeconomic conditions caused by factors including, among others, inflation, high interest rates, labor shortages, supply chain disruptions and pandemics like COVID-19 on our operations and financial results, the financial performance of our equity method investments, including Cencora, the amount of our goodwill impairment charge (which is based in part on estimates of future performance), the influence of certain holidays and seasonality, our cost-savings and growth initiatives, including statements relating to our expected cost savings under the Footprint Optimization Program, our 2025 priorities, including those related to the U.S. Retail Pharmacy segment, addressing reimbursement models with our partners, and monetization efforts, and expansion and future operating and financial results of our U.S. Healthcare segment, including our long-term sales targets and profitability expectations. All statements in the future tense and all statements accompanied by words such as “expect,” “outlook,” “forecast,” “would,” “could,” “should,” “can,” “will,” “project,” “intend,” “plan,” “goal,” “opportunity,” “guidance,” “projection,” “target,” “aim,” “continue,” “extend,” “transform,” “strive,” “enable,” “create,” “position,” “accelerate,” “model,” “long-term,” “believe,” “seek,” “estimate,” “anticipate,” “may,” “possible,” “assume,” “potential,” “preliminary,” “trend,” “future,” “predict,” “assumption,” “commentary,” “focus on,” “ambition,” “vision,” “belief,” “hypothetical,” “aspire,” “confident,” “remains,” “on track,” “priorities,” “approximate,” and variations of such words and similar expressions are intended to identify such forward-looking statements.

These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions, known or unknown, that could cause actual results to vary materially from those indicated or anticipated.

These risks, assumptions and uncertainties include those described in Item 1A (Risk Factors) of our Form 10-K for the fiscal year ended August 31, 2024, as amended and supplemented by those described in Item 1A (Risk Factors) of our Form 10-Q for the fiscal quarter ended February 28, 2025, and in other documents that we file or furnish with the SEC. If one or more of these risks or uncertainties materializes, or if underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. All forward-looking statements we make or that are made on our behalf are qualified by these cautionary statements. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made.

We do not undertake, and expressly disclaim, any duty or obligation to update publicly any forward-looking statement after the date of this release, whether as a result of new information, future events, changes in assumptions or otherwise.

Please refer to the supplemental information presented below for reconciliations of the non-GAAP financial measures used in this release to the most comparable GAAP financial measure and related disclosures.

ENDS

Notes to Editors:

About Walgreens Boots Alliance

Walgreens Boots Alliance (Nasdaq: WBA) is an integrated healthcare, pharmacy and retail leader serving millions of customers and patients every day, with a 175-year heritage of caring for communities.

A trusted, global innovator in retail pharmacy with approximately 12,500 locations across the U.S., Europe and Latin America, WBA plays a critical role in the healthcare ecosystem. Through dispensing medicines, improving access to pharmacy and health services, providing high quality health and beauty products and offering anytime, anywhere convenience across its digital platforms, WBA is shaping the future of healthcare in the thousands of communities it serves and beyond.

WBA employs approximately 312,000 people, with a presence in eight countries and consumer brands including: Walgreens, Boots, Duane Reade, No7 Beauty Company and Benavides. The Company is proud of its contributions to healthy communities, a healthy planet, an inclusive workplace and a sustainable marketplace. In fiscal 2024, WBA scored 100% on the Disability Equality Index for disability inclusion.

More Company information is available at www.walgreensbootsalliance.com.

(WBA-ER)

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