Walgreens Q3 2025: Sales Rise, Profits Fall Amid Merger Headwinds

Walgreens Boots Alliance's latest quarterly report paints a complex picture of a company in transition. While sales continue to climb, profitability is under pressure, and the company is navigating significant strategic shifts, including a massive pending merger. Let's break down the key takeaways from their Q3 2025 filing.

Growing Sales, Shrinking Profits

At first glance, Walgreens' top line looks healthy. The company reported a 7.2% increase in sales, reaching nearly $39.0 billion for the quarter ended May 31, 2025. This growth was fueled by both its U.S. Retail Pharmacy and International segments.

However, a look "under the hood" reveals profitability challenges. The company swung from a $230 million profit in the same quarter last year to a total net loss of $196 million. For the first nine months of its fiscal year, the total net loss stands at a staggering $4.8 billion. The main driver for the nine-month loss was a significant non-cash impairment charge of $3.7 billion related to goodwill from previous acquisitions, signaling that past deals have not lived up to expectations.

Here's a visual breakdown of how revenue flows through the company's costs to the bottom line.

A Mixed Bag Across Segments

The story differs significantly across Walgreens' business divisions:

• U.S. Retail Pharmacy: This core segment, which includes the familiar Walgreens and Duane Reade stores, saw sales rise 7.8% to $30.7 billion. Despite this, its operating income plummeted from $237 million last year to just $5 million this quarter. The company cited lower retail sales (non-pharmacy items) as a primary reason for the margin pressure.
• International: A clear bright spot. This segment, which includes Boots pharmacies in the UK, posted a 7.8% sales increase to $6.2 billion and a strong 31.1% jump in operating income to $188 million.
• U.S. Healthcare: This newer segment, central to Walgreens' strategy to move beyond retail, showed signs of improvement. While sales were roughly flat at $2.1 billion, its operating loss narrowed considerably to $64 million from $220 million a year ago. Adjusted EBITDA for the segment improved to $86 million, a positive sign for its investments like VillageMD.

Turnaround Efforts and Merger Headwinds

Walgreens is actively trying to right the ship. Its "Footprint Optimization Program" continues, leading to store closures and other cost-saving measures totaling $473 million in charges over the past nine months.

Complicating this turnaround is a pending merger agreement with private equity firm Blazing Star Parent, LLC, announced in March 2025. The filing introduces new risk factors associated with the deal, highlighting potential distractions for management, restrictions on business operations until the deal closes, and the overall uncertainty that comes with such a transformative transaction.

In conclusion, while Walgreens is successfully growing its revenue, it faces a tough battle to restore profitability, particularly in its core U.S. retail business. The improving health of its U.S. Healthcare segment is encouraging, but the company's path forward is clouded by internal restructuring and the major uncertainties of a pending takeover.