Walgreens on Thursday reported fiscal second-quarter gross sales that beat Wall Road’s expectations, however lowered the excessive finish of its full-year adjusted earnings outlook partly as a result of a “difficult” retail environment within the U.S.

The corporate additionally posted a steep internet loss for the quarter because it recorded a hefty almost $6 billion cost associated to the decline in worth of its funding in primary-care supplier VillageMD. Walgreens has closed 140 VillageMD clinics amid monetary woes for the enterprise, which it sees as crucial to its ongoing push to rework from a serious drugstore chain into a big health-care firm.

However Walgreens doesn’t consider the VillageMD cost “could have a big affect on our monetary place, or our capability to speculate throughout companies going ahead,” Walgreens world CFO Manmohan Mahajan mentioned throughout an earnings name Thursday.

The outcomes come as Walgreens’ new CEO, Tim Wentworth, works to slash prices and steer the corporate out of a tough spot with a slate of new executives. Shares of Walgreens fell 30% final yr as the corporate confronted weakening demand for Covid merchandise, low pharmacy reimbursement charges, an unsteady push into well being care and a difficult macroeconomic surroundings. 

In a launch Thursday, the corporate mentioned it’s assured it’s going to meet its aim of saving $1 billion throughout fiscal 2024 via its ongoing cost-cutting program. Walgreens has laid off staff, closed unprofitable shops and used synthetic intelligence to make its provide chain extra environment friendly, amongst different efforts.

Here is what Walgreens reported for the quarter, in contrast with what Wall Road was anticipating, based mostly on a survey of analysts by LSEG, previously often called Refinitiv:

• Earnings per share: $1.20 adjusted vs. 82 cents anticipated
• Income: $37.05 billion vs. $35.86 billion anticipated

Walgreens narrowed its fiscal 2024 adjusted earnings steerage to between $3.20 and $3.35 per share. That compares with the corporate’s earlier outlook of $3.20 to $3.50 per share. Analysts surveyed by LSEG anticipate full-year adjusted earnings of $3.24 per share.

Walgreens mentioned the brand new steerage displays the hurdles dealing with retailers within the U.S. and an early wind-down of its sales-leaseback program. It additionally takes under consideration decrease earnings as a result of Walgreens’ ahead sale of shares of drug distributor Cencora, previously often called AmerisourceBergen.

The corporate mentioned a stronger efficiency in its pharmacy companies section and a decrease adjusted efficient tax charge helped to offset the elements dragging on its earnings. 

However Mahajan mentioned Walgreens expects the present financial backdrop will “proceed to negatively affect our U.S. retail gross sales within the brief time period.”

Wentworth famous on the decision that the corporate is “exploring progressive methods to spice up profitability and progress” in its retail pharmacy division, similar to via new pharmacy reimbursement fashions.

The corporate didn’t give a brand new income forecast for the fiscal yr. Walgreens has not offered that steerage since October, when it mentioned it sees $141 billion to $145 billion in gross sales. 

The corporate reported a internet lack of $5.91 billion, or $6.85 per share, for the quarter. That compares with a internet revenue of $703 million, or 81 cents per share, for a similar interval a yr in the past. a

Excluding sure gadgets, together with the $5.8 billion non-cash cost associated VillageMD, adjusted earnings per share had been $1.20 for the quarter.

The corporate booked gross sales of $37.05 billion within the quarter, a roughly 6% soar from the identical interval a yr in the past. 

In the meantime, Walgreens’ U.S. retail pharmacy segment generated $28.86 billion in gross sales within the fiscal second quarter, a rise of just about 5% from the identical interval final yr.

That section operates greater than 8,000 drugstores throughout the U.S., which promote prescription and nonprescription medicine in addition to well being and wellness, magnificence, private care, and meals merchandise. 

Walgreens mentioned pharmacy gross sales for the quarter rose 8.2% in contrast with the year-ago quarter. Comparable gross sales climbed 8.7% as a result of value inflation in model drugs and “sturdy execution” in pharmacy companies, largely pushed by the corporate’s vaccine portfolio.

Whole prescriptions stuffed within the quarter together with immunizations totaled 305.7 million, a greater than 2% enhance from the identical interval a yr in the past. 

Retail gross sales for the quarter fell 4.5% from the prior-year quarter, and comparable retail gross sales declined 4.3%. The corporate pointed to a difficult retail surroundings and a weaker respiratory season, amongst different elements. 

Walgreens’ international segment, which operates greater than 3,000 retail shops overseas, posted $6.02 billion in gross sales within the fiscal second quarter. That is a rise of greater than 6% from the year-ago interval. 

The corporate mentioned gross sales from its U.Ok. subsidiary, Boots, grew 3%.

When requested on the decision about Eli Lilly‘s new direct-to-consumer web site aimed toward increasing entry to its weight reduction drug Zepbound, Wentworth didn’t touch upon this system particularly.

However he famous that the corporate is a “pure accomplice” for pharmaceutical corporations which will “wish to go on to sufferers for a selected product, the place the conventional provide chain, reimbursement mannequin, et cetera is not working successfully.”

For example, Wenworth pointed to GLP-1s, a brand new class of weight reduction and diabetes medicine that features Zepbound. These medicine have to be taken chronically however carry hefty value tags, which generally is a hurdle for each sufferers and insurance coverage and different payers.

Walgreens is “uniquely positioned” to distribute medicine and function a “clinically aligned accomplice” that may assist sufferers navigate their remedy safely, in keeping with Wentworth.