Walgreens 1st quarter retail sales catch the flu

Walgreens unveiled its first-quarter earnings on Friday—and, in particular, its retail sales were hurt by, well, not enough people falling ill during cold season. But the retailer beat overall expectations as it continues to cut costs and shutter even more stores than initially planned. 

Biggest news for grocery?

Front-end retail continues to be weak for Walgreens, but the pharmacy retailer did drive operating earnings this quarter via cost management initiatives and relative strength in its U.S. pharmacy services businesses. Walgreens is still hurting from an inflationary environment and higher interest rates, according to Eric Wasserstrom, Walgreens senior vice president of Investor Relations. He also noted that a warmer initial winter season (with reduced colds) affected associated trips and baskets. Basically: people were getting sick less and it hurt Walgreens significantly—contributing to about half of Walgreens’ retail decline year over year.

Walmart has already announced a slew of store closures and now there will be even more, according to Wasserstrom, who said during Friday’s earnings call that the retailer plans to “significantly ramp the pace” of its store closures as compared to the first quarter.

Why it matters

Walgreens is still hurting from inflation, and less consumer spending on discretionary categories doesn’t help any. The retailer is hoping that its plan to close 1,200 stores (first announced in October) will help stabilize retail pharmacy sales by getting operating costs under control and improving cash flow. It remains to be seen whether that will be enough.

First quarter financials by the numbers:

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