By Manas Mishra and Sneha S K
(Reuters) -Walgreens Boots Alliance beat analysts’ lowered expectations for first-quarter adjusted profit on Friday and indicated that its restructuring was taking hold, sending the U.S. pharmacy chain operator’s shares up nearly 25%.
The company has announced thousands of store closures, a $1 billion cost-cutting program, and is exploring options for its non-core businesses as CEO Tim Wentworth seeks to kick-start growth and stem a sharp drop in its share price.
“Our turnaround will take time, but as today’s results demonstrate, we are executing with urgency,” Wentworth told analysts in a post-earnings conference call.
Closely watched metrics such as same-store sales at its retained outlets were outperforming those slated to close at the end of the year, the company said.
Excluding items, Walgreens reported earnings of 51 cents per share in the first quarter, compared with analysts’ average estimate of 37 cents, according to data compiled by LSEG.
The quarterly performance was better than expected, but the number of moving parts in the broader story remains numerous and unchanged, said Leerink Partners analyst Michael Cherny.
Walgreens, which operates the second-largest pharmacy chain in the U.S., is also working to simplify drug pricing at its stores, executives said, when asked about bigger rival CVS Health (NYSE:CVS)’s announcement this week.
CVS has said all commercial prescriptions dispensed at its pharmacies this year will be reimbursed by the cost of the drug plus a fixed markup and fees.
Wentworth said the company was working on similar arrangements in its contract negotiations with pharmacy benefit managers.
Investors fled Walgreens as its profits came under pressure from persistently low drug reimbursement rates and consumers avoiding high-priced grocery items.
The company was looking to sell itself to private equity firm Sycamore Partners and had also reached out to other potential buyers, according to media outlets. The company has declined to comment on the reports.
Walgreens’ total sales of $39.46 billion also beat expectations of $37.36 billion. Sales in its U.S. retail pharmacy unit also surpassed estimates.