• by Sarah Mahoney  @mahoney_sarah, January 6, 2023

First-quarter results at Walgreens Boots Alliance beat expectations, reassuring observers that the company is getting its retail mojo back. And despite its massive $6.2 billion operating loss, due to its settlement of recent opioid litigation, Walgreens is showing how resilient its new business model is.

Sales slipped 1.5% to $33.4 billion, compared with $33.9 billion in the year-ago period. (On a constant currency basis, revenues rose 1.1%.) Comparable retail sales in the U.S., excluding tobacco, rose 2.1%, a gain that's impressive given last year's 11.7% jump. Increased sales of strong cough, cold and flu-related products helped, as did a 4.9% growth in beauty products and a 2.1% improvement in consumables.

Comparable prescription sales in its pharmacies rose 2.1%, excluding immunizations, as new marketing initiatives gained traction.

The Deerfield, Illinois-based company's net loss of $3.7 billion compares to a net income of $3.6 billion in the year-ago quarter

For the full year, Walgreens now expects to achieve between $133.5 billion to $137.5 billion in sales, saying its "strong core business growth is more than offset by lapping fiscal year 2022 COVID-19 execution and currency headwinds."

"This increase reflects a boost in sales from recently acquired Summit Health, better-than-expected performance in its U.S. retail pharmacy, and a more favorable foreign-exchange outlook," writes Julie Utterback, senior equity analyst, who follows Walgreens for Morningstar. That's despite waning coronavirus-related sales, such as vaccines and at-home test purchases.

"Overall, we continue to appreciate the synergy between the company's retail pharmacy and healthcare services as Walgreens navigates through a tough competitive landscape in retail and expands in the fragmented services market."

The report encouraged investors, who have sometimes struggled to get clarity, given Walgreen's aggressive expansion into the healthcare business.

The company just closed its $3.5 billion deal to support VillageMD's acquisition of Summit Health. But in a conference call discussing  earnings, it said it will hold off on more big purchases for the time being.