Walgreens shares slump after missing earnings estimates and slashing guidance

Biggest loser today is Walgreens at the very bottom of the market, shares tumbling now down more than 22% after missing earnings estimates, slashing its outlook. Our Bertha Coombs speaking with Walgreens CEO joins us with the highlights. Bertha, as these conference call headlines come through and they're pretty bearish too. We're at the point where current pharmacy model is not sustainable, according to the CEO on the call just now. Exactly. Yeah. The Sarah Walgreens CEO, Tim Wentworth told me ahead of that call that, you know, he took this job seven months ago because he believes in the role of the pharmacy in a community. But it's going to take a big reboot to turn things around here. Walgreens posting a mixed quarter. Earnings coming up short because of continued margin pressures on pharmacy reimbursement at the back of the store while in the front of the store. That's really where the problems is. Same store sales are down 4% year over year driven by consumers are cautious. He says, you know, they are still in shock over these high prices and continuing issues with that. Issues, they say, will persist in the second-half of this year, the calendar year and into the next fiscal year. They're in talks right now to renegotiate contracts with pharmacy benefit managers and a way to try to short margins, especially on generics. Then they're also in the front of the store. They're cutting back on some of the big brand names and reverting to more store brands to focus on private labels as a way to boost their margins there. And they're looking to close underperforming stores. Tim told me last night that 75% of stores are the ones that produce the profits, so up to 25% of their footprint could close here. A lot of those are in high theft urban areas. But Wentworth says they want to work with community leaders to try to find a solution. We know that we are the last company standing in a lot of places. We are the only thing standing between those places and being pharmacy deserts. And our goal is not simply to be the last one to leave. Our goal is to actually find new ways to work together, whether it's with state Medicaid programs, whether it's with local law enforcement and so forth, for them to do their jobs so that we can do our jobs and continue to provide care in those communities. Timing for this turn around, the shrinking of the footprint, they're saying several quarters, not years. Walgreens shares hitting the lowest levels this morning since 1997. Back over to you, Mike. Oh, I just have a question, Bertha, which is how much of this is a Walgreens specific issue? Is CVS dealing with the same level of theft and sort of broken model at the at the front end of the store? They are. But here's part of the problem for Walgreens and why we saw Rite Aid declaring bankruptcy. Their standalone CVS is more vertically integrated. It has what's known as a pharmacy benefit management. They're the ones who do the deals with the the pharmaceutical companies, with the payers, the insurers, the large employers, and they kind of determine reimbursement. Walgreens doesn't have that. And ironically, Tim Wentworth came from one of the biggest Express Scripts. He was their CEO for a long time. So this is one of the problems for a standalone pharmacy. That said, a lot of people still rely on their pharmacist. You know, when they leave the hospital and they have a certain protocol for their drugs or if their physician prescribes something that doesn't work with drugs they're already taking. The pharmacist is really the point person on that many times. So he says they want to shrink to give them more time and really be able to boost those services in the stores that are open.