What happened

On Thursday morning, Walgreens Boots Alliance (WBA 0.68%) reported fiscal 2023 first-quarter results that beat analysts' expectations, but its retail sales fell year over year, and management offered tepid guidance. Investors were disappointed, and sent shares of Walgreens down as much as 7.8% in morning trading. As of 12:13 p.m. ET, the stock was off by 7.6%.

So what

For the period that ended Nov. 30, Walgreens earned $1.16 per share on revenue of $33.38 billion, exceeding analysts' consensus expectations for $1.13 per share in earnings on $32.83 billion in sales. But  the company's retail sales declined by 3% year over year, largely due to a fall-off in demand for COVID-19 vaccinations and testing.

The results were also clouded by a $6.5 billion charge tied to settlements of opioid-related lawsuits. Investors knew those settlements were coming, but seemed to be caught off guard by the lack of momentum in the retail business during what has been an active winter for colds, influenza, and other illnesses.

The company reported progress in its effort to broaden its business beyond drugstores and toward broader healthcare services. In a statement, CEO Rosalind Brewer said Walgreens is "making significant progress in driving our U.S. healthcare business to scale and profit," including the recently announced $9 billion acquisition of clinic operator Summit Health.

"Our core retail pharmacy businesses in both the United States and United Kingdom remain resilient in challenging operating environments," Brewer said. "Execution across segments reinforces our confidence in achieving full-year guidance, and our strategic actions are creating long-term shareholder value."

Now what

Unfortunately for investors, that transition is likely going to take some time to pan out. On Thursday, Walgreens upped its forecast for fiscal 2023 sales by about 2% to a range of between $133.5 billion to $137.5 billion, but left its profit guidance unchanged.

The good news for investors is there were no surprises in the Walgreens results. The bad news is there is going to be some choppiness as it faces headwinds from legal settlements and merger integrations. Walgreens Boots Alliance is on a journey, and it will take some time for the company to reach its destination.