Walgreens’ Bold Healthcare Pivot Lifts Stock Despite Internal Struggles
Despite the retailer's ongoing issues with in-store theft and more, Walgreens delivered a robust Q1 2025 earnings report Friday. Its revenue print of 7.5% to $39.5 billion and adjusted EPS of 51 cents handily beat Wall Street's tepid expectations.
Yet, beneath these seemingly bullish headlines, some bearish numbers lurk in the ne'er-do-well aisles, revealing a more complex reality. For one, Walgreens continues to deal with a $265 million net loss and an aggressive restructuring plan that will shutter 1,200 U.S. locations over three years. It compares with a net loss of $67 million, or 8 cents per share, for the year-earlier period.
The market, apparently uncaring about all that, saw their stock pop 25%, likely pricing in CEO Tim Wentworth's ambitious $1 billion cost-cutting strategy and healthcare pivot rather than current fundamentals.
VillageMD clinic investments appear determined to push into higher-margin healthcare services even as the core retail pharmacy business faces ongoing competitive pressures and reimbursement headwinds that could make or break upcoming quarters. Walgreens plans to open 1,000 Village Medical clinics at Walgreens stores by 2027, with 600 clinics expected to be operational by 2025. These clinics will provide primary care services, including chronic disease management, preventive care, and wellness programs, alongside Walgreens' pharmacy offerings.
On the fronts of their competitors, who could possibly "outheal" Walgreens to disrupt their plans are likely CVS and Walmart Health. CVS is Walgreens' largest direct competitor and has an overall more advanced healthcare ecosystem, operating MinuteClinics and owning Aetna, one of the largest health insurers in the U.S. It should go without saying that Walmart's extensive store network and focus on affordability make it an effective and powerful competitor in underserved and rural areas that Walgreens, but Walgreens, a notably stronger presence in rural communities compared to its main competitor CVS.