June 26 EST: Walgreens Boots Alliance turned in better-than-expected earnings for its third fiscal quarter — a solid, if uneven, showing as the company readies to leave public markets in a $10 billion buyout led by Sycamore Partners.
The results offer a glimpse of a company straddling two worlds: still subject to the pressures of quarterly reporting, yet already shifting gears toward long-term restructuring under private ownership.
Pharmacy Drives the Quarter — But Retail Still Lags
Pharmacy is still doing the heavy lifting. U.S. retail pharmacy sales hit $30.71 billion, comfortably ahead of Wall Street estimates around $29 billion. Same-store sales rose 10.3%, helped by script volume and better pricing.
Operating income from the U.S. pharmacy segment came in at $350 million — more than triple what analysts had penciled in. Meanwhile, adjusted EPS landed at $0.38, beating the $0.34 consensus.
But it wasn’t all clean upside. Gross margin slipped 108 basis points, a reflection of persistent reimbursement pressure and product mix issues. Front-end retail also remains a drag: revenue from that segment dropped 5.3%, with comparable sales off 2.4%. That side of the business continues to lack a clear path forward.
Cutting Costs, Selling Assets
Walgreens is moving fast on cost containment. It’s halfway through a $1 billion restructuring, which has included store closures and mid-level management cuts. That’s not just optics — it’s starting to flow through the numbers.
Still, there’s unfinished business. VillageMD, the company’s once-touted healthcare bet, continues to bleed. Walgreens wrote down $5.8 billion last year and is now weighing options that could include a sale. For a venture once positioned as central to its healthcare pivot, that’s a major reversal.
Cash flow is improving. Walgreens ended the quarter with $766 million in cash and $7.37 billion in total debt — modestly better than the $8 billion on the books last quarter. But with retail still soft and VillageMD unresolved, the company’s margin for error is narrow.
Sycamore Deal Shifts the Equation
The Sycamore deal — first announced in March — is expected to close by year-end 2025. Walgreens has already withdrawn its financial guidance, signaling that it’s in transition mode.
For Sycamore, the attraction is clear: a structurally profitable pharmacy business buried under a bloated retail footprint and a series of half-finished pivots. Analysts expect the private equity firm to evaluate a spin-off or sale of Boots, Walgreens’ international division, once the deal closes.
Privatization gives Walgreens a chance to reset — to rebuild without the treadmill of quarterly earnings and to clean up a balance sheet without being watched at every turn. But it also raises the stakes. The market won’t be as forgiving next time around.
A Company in Limbo, But Not in Retreat
Shares ticked higher on the results — up just over 1% — as investors digested both the upside surprise and the larger strategic unwind. For now, Walgreens is doing what it needs to: cut costs, stabilize earnings, and prep for life out of the public eye.
The real test starts post-close. Sycamore will want returns, and quickly. That likely means selling underperforming assets, doubling down on core pharmacy, and rethinking healthcare exposure.
This quarter showed that Walgreens can still deliver — but it also made one thing clear: the company it’s been isn’t the one it wants to be. And after the buyout, it won’t have Wall Street to answer to — only itself.
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A Wall Street veteran turned investigative journalist, Marcus brings over two decades of financial insight into boardrooms, IPOs, corporate chess games, and economic undercurrents. Known for asking uncomfortable questions in comfortable suits.
