“This goodwill write-off is noncash, and we do not believe it will have a significant impact on our financial position or our ability to invest across businesses going forward,” CFO Manmohan Mahajan told analysts on a conference call discussing Walgreens’ fiscal Q2 numbers. “We have seen positive financial impacts from the recent actions taken by VillageMD management […] We believe the focused approach on improving performance in core markets as well as rightsizing the cost structure will provide VillageMD a platform for future growth.”
The massive Village impairment charge overshadowed the adjusted profitability milestone of Walgreens’ healthcare group as a whole. The division, which also includes the Shields specialty pharmacy business and homecare business CareCentrix, produced adjusted EBITDA of $17 million last quarter, an improvement of $127 million from the same period last year, on total sales that grew by a third to nearly $2.2 billion. The group narrowed its adjusted operating loss to $34 million from a loss of $160 million a year earlier.
CEO Tim Wentworth and his team are sticking to their full-year goal to have Walgreens’ healthcare group break even on an adjusted EBITDA basis. That’s as new division president Mary Langowski goes through a review of the various ventures under her umbrella to ask, as Wentworth said on the conference call, “is it staffed right, is it built for growth, does the market support growth.”
The Walgreens leadership team is running a similar review of all the company’s businesses, which includes its flagship U.S. pharmacies and retail stories and the Boots chain in the United Kingdom.
“We have about a half a dozen things that need to either fit, they need to synergize, they need to offer upside in a long-term runway for growth either by themselves or perhaps combined with other things,” Wentworth said. “They need to unlock capabilities that we would otherwise not be able to have unlocked or else we need find a better place for them.”
Shares of Walgreens (Ticker: WBA) rose roughly 3 percent on the company’s Q2 report and were changing hands around $21.70 in afternoon trading March 28. They’re up slightly over the past six months, growing the company’s market capitalization to nearly $19 billion.
