Walgreens booked a better-than-expected fiscal first quarter and gave Wall Street some positive vibes on the drugstore chain's plan to revive its struggling business.
Company shares soared Friday after leaders told analysts they have made progress improving one of the biggest concerns facing the industry, shrinking prescription reimbursement, and said their store-closing plan was progressing better than expected.
CEO Tim Wentworth told analysts the company has had success modifying contracts with commercial insurers as well as Medicare and Medicaid plans that pay for prescriptions, including adjusting for high-cost drugs.
He also said the company has done better than expected in shifting prescriptions from U.S. stores it is closing to other Walgreens locations that remain open. The company announced in October a plan to close around 1,200 mostly underperforming U.S. locations.
Walgreens closed 70 in its fiscal first quarter and plans shutter around 500 this year. The company runs about 8,500 locations in the U.S and Puerto Rico as well as a few thousand stores in Europe and Asia.
Those stores still face problems. They include a consumer who is buying less due to inflation and persistent theft, which Wentworth referred to as ''hand-to-hand combat.''
Overall, though, the company reported a good fiscal first quarter, according to Edward Jones analyst John Boylan.
''However, we think it is premature to say that Walgreens is on a stable path to growth,'' he said, noting that prescription reimbursement changes will take time and their impact remains uncertain.
