Walgreens Boots Alliance (WBA 0.04%) is one of the largest pharmacy retailers in the United States. The company has not been performing particularly well for the last few years. While there's a potential turnaround opportunity for the business in the years ahead, that probably isn't going to translate into a big investment opportunity.
Here's what you need to know about Walgreens before you buy it today.
What does Walgreens do?
Walgreens is a retailer. It isn't just any retailer, however -- it's a pharmacy, which is a somewhat specialized niche in the retail sector. There are basically two parts to its business. The core is the health-related pharmacy operation, which is normally located at the back of the store. This is the part of the operation that creates repeat business, as people come back again and again to get their prescribed medications.
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The rest of the retail operation is more traditional. Walgreens primarily offers a range of products, from consumer staples to discretionary items. The list of goods being sold tends to be tilted toward health-oriented areas, but most pharmacies also sell some technology gear, clothing, and seasonal items. The hope is that people will come for the medication and pick up a few things on the way through the store. Walgreens has an international business, but the company's big driver is its U.S. operations.
It isn't a bad business model, but the U.S. market is largely saturated. Competition is fierce, and more and more ways to buy medication now exist, exacerbating the issue. They include grocery stores, big box retailers, and online retailers.
Walgreens has not been performing particularly well of late. To put a number on that, it lost money on a GAAP basis in the first quarter of 2025. Adjusted earnings of $0.63 per share, which takes out one-time costs like a $4.2 billion impairment charge, were far below the $1.20 per share earnings in the previous year.
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Walgreens' stock price isn't going anywhere fast
Walgreens' weak business performance is not a new phenomenon. It has been struggling for years. At first, it was more about sluggish growth. But some notable strategic missteps changed the story for the worse. Along the way, the retailer, which was just a couple of years away from Dividend King status, ended up drastically reducing its dividend at the start of 2024. The dividend was suspended at the start of 2025.
The $4.2 billion impairment noted above, meanwhile, was to write down the value of the company's foray into operating health clinics. The company has fallen on very hard times. There may still be life for Walgreens, but shareholders aren't likely to see the benefit.
In early 2025, Walgreens agreed to be acquired by Sycamore Partners for $11.45 a share. The big turnaround opportunity will happen while the company is in private hands. Meanwhile, Walgreens' stock price is around $11.20 per share, which means there's around $0.25 per share in possible gains here for investors trying to arbitrage the takeover. That amounts to a return of around 2%.
The downside risk is likely to be far greater if the deal isn't consummated as planned, since Walgreens' stock price would likely fall. That, however, isn't the entire story. There's the opportunity for current shareholders to receive an additional $3 per share in compensation if Walgreens can extract any value from its investment in health clinics. That would boost the return into the high 20% range, but there's no guarantee for that $3 per share figure and there's no firm timeline. Buying with the hope of earning that $3 is pretty close to a gamble at this point.
Walgreens is not worth buying for most investors
Walgreens is something of a special situations play at this point. Since the buyout price is only a few percentage points above the current stock price, it probably isn't worth buying for most investors. If that potential bonus payment is enticing you, keep in mind that the outcome there is highly uncertain at this point. Unless you have very strong convictions in the value of the company's health clinic investment, the potential rewards here probably aren't worth it.
