Walgreens Boots Alliance, Inc.

First-quarter fiscal 2025 sales increased 6.9% on a constant-currency basis. Adjusted EPS was $0.51, down 23% year over year on a constant-currency basis. US retail pharmacy comparable sales rose 8.5%; pharmacy comp sales rose 12.7%; US retail comparable sales declined 4.6%; international sales grew 6.5% constant currency; Boots UK comp retail sales rose 8.1%; Boots.com sales increased 23%; and US healthcare sales were $2.2 billion, up 12%. US healthcare adjusted EBITDA was $70 million, up $109 million from last year. GAAP net earnings included $252 million of after-tax charges tied to footprint optimization and a $152 million non-cash fair value charge related to Syncora derivatives. For the full year, management reaffirmed adjusted EPS guidance of $1.40 to $1.80 and now expects fiscal 2025 retail comp sales to decline approximately 4% to 5% versus prior guidance of down 2% to 3%. The company still expects $100 million in AOI benefit from footprint optimization and said it is ahead of its target for a $150 million reduction in capital expenditures.

Tim Wentworth framed the quarter as early progress on a multi-year turnaround, emphasizing execution on footprint optimization, pharmacy reimbursement, drug procurement, and retail repositioning. He said the smaller store base should be healthier, that script retention during closures is better than expected, and that the company is acting with urgency but acknowledges there is still substantial work ahead. His tone was cautiously optimistic and focused on controllable actions rather than near-term excitement.

Manmohan Mahajan said results were better than expectations and highlighted 6.9% constant-currency sales growth, $0.51 adjusted EPS, and a 23% year-over-year EPS decline driven by prior-year sale-leaseback gains and lower Syncora equity income. He pointed to US pharmacy gross margin pressure from brand inflation, mix, and reimbursement, while noting adjusted SG&A was flat in US retail pharmacy despite a $160 million headwind from prior-year sale-leaseback gains. On cash flow, he said operating cash flow was hurt by seasonal inventory builds and $137 million of legal payments, but free cash flow improved year over year due to lower capex and higher adjusted operating income; the company is on track for $500 million in working capital initiatives, ahead of its $150 million capex reduction target, and reduced lease obligations by $652 million. He also said the company continues to evaluate dividend size and expects the negative impact from recent NADA changes to be less than $50 million for the rest of the year.

Analysts pressed on reimbursement reform, asking whether the 2025 contracts represent a meaningful portion of the book and whether the new terms are improving 2025 economics or just setting up future improvement. Management said the contracts cover a meaningful percentage, that roughly two-thirds of contracts still remain, and that the changes include carving out higher-cost drugs, rebalancing brands and generics, and seeking payment for additional services beyond dispensing. Questions also focused on store-closure execution, with management saying about 70 stores were closed in the quarter and about 450 more are sequenced, and on procurement with Syncora, where management said it is making incremental progress but has not yet built any benefit into guidance. On free cash flow, management declined to give full-year guidance but said the company is broadly in line with its earlier framework and expects continued progress from operating improvement, capex discipline, working capital, and lower legal-payment run rates over time.