Walgreens is marching on in its downsizing and bearing the costs tied to it, as its results for the second fiscal quarter of 2024 show.
Walgreens posted a loss of nearly $6 billion in its second fiscal quarter of 2024 due to a devaluation of its investment in primary care clinic chain VillageMD.
The company posted a Q2 operating loss of $13.2 billion in contrast to an operating income of $197 million in the same quarter of 2023. This operating loss was primarily due to a non-cash impairment charge of $12.4 billion related to VillageMD goodwill, which amounted to a $5.8 billion after-tax non-cash charge attributable to Walgreens.
Net loss in the second quarter was $5.9 billion compared to net earnings of $703 million in Q2 2023. The company did report that its healthcare segment had quarterly sales of $2.2 billion — up 33% compared to the year-ago quarter.
Walgreens released a plan in October 2023 to trim its cost structure by $1 billion, which involved plans to pull VillageMD out of a handful of markets and close around 60 clinics in fiscal 2024. The company has pulled VillageMD out of Florida and Illinois and sold numerous Rhode Island clinics.
Walgreens Boots Alliance became the majority owner of VillageMD in 2021 with a $5.2 billion investment. The primary care clinic chain continued to grow larger under its ownership with the $8.9 billion acquisition of Summit Health-CityMD in 2023 that added more than 2,800 providers to its ranks. Walgreens invested $3.5 billion through an even mix of debt and equity to support that acquisition.
"We remain confident in our goal of achieving $1 billion in cost savings this year," Walgreens CEO Tim Wentworth said in the Q2 results release. "We are continuing to strategically review our portfolio over the next three months in an effort to ensure it drives growth and delivers value."
The company has seen significant changes to its leadership structure alongside its push for financial efficiency. Mr. Wentworth is about six months into his tenure as CEO. In February, Walgreens welcomed a new U.S. healthcare president, Mary Langowski, and named a permanent global CFO, Manmohan Mahajan.
With its Q2 results, Walgreens said it expects an adjusted profit of $3.20 to $3.35 per share for the financial year ending Aug. 31 — the lower end of the $3.20 to $3.50 fiscal 2024 adjusted earnings per share it expected last year.