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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 Walgreens has already withdrawn its financial guidance, signaling that it’s in transition mode.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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