Summary

Walgreens Boots Alliance (WBA) is set to report its fiscal first-quarter earnings before the opening bell on Friday, following a year where it was the worst-performing stock in the S&P 500. The pharmacy chain's turnaround plan, announced in October, includes closing over 1,200 stores across the United States over the next three years.

Analysts' Expectations and Sentiment

Analysts have mixed views on Walgreens stock, with five "hold" ratings, one "buy," and one "sell" rating among the seven analysts tracked by Visible Alpha. The average price target of $10 represents an 8% increase from Wednesday's close. This cautious sentiment reflects concerns about the company's ability to recover from a challenging retail environment in 2024.

Recent Developments and Challenges

Walgreens faced significant challenges last year, including a decline in sales and stock price. The pharmacy chain lowered prices as part of its efforts to win back customers, but this move put pressure on profit margins. The company's stock hit its lowest point in decades during the second half of 2024, ending the year at $9.33.

Turnaround Plan and Store Closures

In October, Walgreens announced a plan to close approximately 1,200 stores across the United States over the next three years as part of its efforts to stabilize the retail pharmacy business and cut costs. About 500 of these closures are expected to occur in this fiscal year. This move is aimed at optimizing the company's footprint and improving profitability.

Potential Acquisition by Private Equity Firm

Last month, reports emerged that Walgreens was engaged in discussions with private equity firm Sycamore Partners regarding a potential acquisition. There were indications that Sycamore might sell off parts of the pharmacy chain as part of the deal. However, no official announcement has been made, and it remains unclear whether such a transaction will materialize.

Earnings Report Expectations

Walgreens is projected to report $37.33 billion in sales for the first quarter, up from $36.71 billion during the same period last year. The company's net loss per share is expected to be 2 cents compared to 8 cents in the previous year. However, its adjusted earnings per share (EPS) are anticipated to be 38 cents per share, which would represent a decline from 66 cents a year ago.

Conclusion

Walgreens' upcoming earnings report will provide insight into the company's performance and its ability to execute its turnaround plan. Analysts' expectations are cautiously optimistic, with some anticipating an increase in the stock price above $10. However, the challenges faced by Walgreens in recent years, including store closures and potential acquisition talks, underscore the complexities of the retail pharmacy sector and the need for continued innovation and strategic planning.

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