Q & A Highlights

Q : Can you provide more details on the new reimbursement contracts for 2025 and the script retention rates? A : Timothy Wentworth, CEO, explained that the new reimbursement contracts have been structured to better align with costs, including creating categories for high-cost drugs and rebalancing brands and generics. While the contracts are typically multiyear, they can be revisited as needed. The script retention rates have been better than expected, particularly in stores that have been closed, with a focus on improving the patient experience during transitions.

Q : Are the actions taken to address reimbursement pressures leading to an absolute improvement in 2025? A : Timothy Wentworth, CEO, stated that the actions taken are leading to both immediate improvements and future stability. The restructuring of contracts has reduced pressure compared to previous years, and the company is on track to achieve its goals over the next three years, focusing on increased value and profitability in pharmacy operations.

Q : Given the strong first-quarter performance, why is the guidance for the year not adjusted? A : Timothy Wentworth, CEO, noted that the first-quarter strength was driven by good pharmacy volumes and reimbursement for vaccines. The company expects continued improvement in 2025 due to new contracts but maintains guidance due to uncertainties in the retail environment and other factors.

Q : How is Walgreens working with Cencora to improve drug procurement? A : Timothy Wentworth, CEO, emphasized the importance of modernizing drug procurement to be world-class. Walgreens is working closely with Cencora to achieve competitive pricing and improve long-term procurement strategies, which are expected to benefit both companies.

Q : What are the expectations for free cash flow and the rollout of micro fulfillment centers? A : Manmohan Mahajan, CFO, highlighted improvements in free cash flow due to better operating performance and reduced capital expenditures. The company is on track with its working capital initiatives. Regarding micro fulfillment centers, Walgreens plans to expand their use to more stores, improving efficiency and allowing pharmacists to focus on patient care.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .

This article first appeared on GuruFocus .