Walgreens Overpaid Nearly $6B for VillageMD Clinics

Walgreens Boots Alliance announced a significant loss of $5.8 billion related to its VillageMD clinics, following its acquisition of a major stake in the healthcare provider three years ago. This financial setback was detailed in the company’s Q2 earnings report, which revealed an operating loss of $13.2 billion for the quarter. This marked a drastic shift from the $197 million operating income reported in the same quarter last year.

The loss includes a $12.4 billion non-cash impairment charge tied to VillageMD goodwill, with Walgreens attributing $5.8 billion of this charge to the company, net of tax and non-controlling interest. The reported loss per share was $6.85, a sharp decline from earnings of $0.81 per share during the previous year.

Despite these poor results, Walgreens saw a 6.3% year-over-year increase in sales for the quarter, reaching $37.1 billion. Additionally, adjusted earnings per share rose 3.4% to $1.20, driven by improved profitability in U.S. healthcare. The company has narrowed its fiscal year 2024 adjusted earnings per share guidance to between $3.20 and $3.35, citing a challenging retail environment in the U.S.

The company also maintained its U.S. healthcare adjusted EBITDA guidance of between negative $50 million to $50 million. Walgreens CEO Tim Wentworth expressed optimism about the company’s positive first quarter in U.S. healthcare, continued topline growth, and strong pharmacy execution, despite the retail challenges.

Walgreens is focused on customer engagement and value, aiming to achieve $1 billion in cost savings for the year. As part of its efforts to streamline operations, the company has laid off more than 1,000 employees since last year, with notable cuts in its corporate workforce and the closure of several VillageMD clinic locations in Illinois, Florida, and Indiana. The company continues to evaluate its portfolio and strategic direction to navigate its current challenges.