Tim Wentworth
Chief Executive Officer at Walgreens Boots Alliance
Thanks, Tiffany, and good morning, everyone. When I joined you for the last earnings call in October, I had not yet begun my role as CEO. But I shared how I believe that leading WBA is a once in a lifetime opportunity with a tremendous brand, legacy and neighborhood presence.
Today, 10 weeks into my tenure, I'm even more certain of my decision. I am pleased to be here today to share our results, our outlook and my broader convictions around how we can build on our strong pharmacy foundation to partner across healthcare services and drive sustainable value.
As you are by now aware, WBA started fiscal 2024 with on-plan results despite a weak retail environment in the U.S. First quarter adjusted EPS came in at $0.66, reflecting execution and cost discipline in U.S. Retail Pharmacy, continued strong performance in International, and progress with profitability initiatives in U.S. Healthcare. We are maintaining full year adjusted EPS guidance against a challenging backdrop.
I must give credit here to the hard work and dedication of our teams. We are navigating the accumulating consumer pressures from inflation and depleted savings and somewhat slower-than-anticipated market trends in pharmacy script volumes, including impacts from a weaker respiratory season and Medicaid redetermination.
Retail customers in the United States are under stress and making deliberate choices to seek value evidenced in our own brands up 90 basis points in the quarter, while demand for seasonal and discretionary categories remains weak. At the same time, our teams executed well during the quarter on delivering pharmacy services, including vaccines and maintaining our overall share of script volume in the U.S. International was once again a bright spot in the quarter, building on last year's solid growth, upside was led by Boots U.K. with further share gains in retail, while both retail and pharmacy delivered gross profit improvements despite inflationary cost pressures. Germany also achieved share gains.
In U.S. Healthcare, we are on track to achieve significant year-on-year profit improvement. VillageMD is rapidly realigning operating costs with sales. The team is executing on several initiatives from revenue cycle management to procurement with operational actions spanning the organization. As VillageMD focuses on increasing density in their highest opportunity markets, remember the previously announced plans to optimize their footprint and exit approximately 60 clinics in non-strategic markets. As of today, they are nearly halfway there, having already exited 27.
Additionally VillageMD is driving patient panel growth and achieved 23% year-over-year growth in full risk lives and 9% growth in fee-for-service volumes. Work is underway to implement targeted marketing efforts, leveraging Walgreens' expertise and patient touchpoints, and we expect benefits over time as we learn and further develop our provider-based risk strategy.
So macroeconomic conditions are clearly difficult for retailers and I fully acknowledge the structural headwinds in our core pharmacy business and the growing pains in our healthcare segment. None of this is a surprise to me. I came to WBA eyes wide open with a clear mandate to act, with everything on the table in terms of putting our business on the right track.
In that context, we are taking swift actions to rightsize costs and increase cash flow across the company. We remain on pace toward $1 billion in cost savings this year. Our U.S. organizational efforts have resulted in a planned headquarters support office workforce reduction of approximately 20%. Over the past two months, we have prioritized projects and capital spend to focus on the customer facing activities that matter most.
First quarter capex was over $100 million lower year-over-year on-track to a $600 million reduction for the full year. We also remain on-schedule to deliver $500 million in working capital benefits in fiscal 2024. An additional meaningful and necessary step to strengthen our long-term balance sheet and cash position, today we are announcing a 48% reduction in our quarterly dividend payment to $0.25 per share starting in March. This action will free-up capital to invest in driving sustainable growth in the pharmacy and healthcare businesses as well as paying down debt.
At the same time, we will continue to deliver a competitive dividend yield as the Board and I continue to view the dividend as a critical component to overall attractiveness of WBA to many of our shareholders. Our financial flexibility is also supported by other strategic actions with some already underway and others under consideration. In November, we monetized an additional portion of our Cencora stake with nearly $700 million of proceeds.
We also took advantage of the higher interest rate environment to secure a full buy-in for the Boots pension plan with Legal and General to ensure the benefits of all 53,000 members. A buyout scheduled in calendar 2025 will eliminate the company's plan obligations and commitments. Furthermore, we continue to evaluate our existing portfolio, sharpening our strategic focus on the U.S. Retail Pharmacy and Healthcare, with our remaining investments in Cencora, BrightSpring and other minority interests, providing financial flexibility.
Let me be clear, we have hard work ahead of us in our journey to simplify and strengthen WBA, but also good momentum with important early actions that we've taken. And there are a number of building blocks already in-place for a sharper healthcare strategy, positioning us well for long-term profitable growth. Walgreens is a dependable, trusted and convenient local healthcare destination for patients, and we have the ability and frankly the market mandate to be a valued independent partner of choice in healthcare services.
As John Driscoll detailed last quarter, we are leveraging our local presence to engage with patients across our thousands of stores, and through our assets across the care continuum, on behalf of payers, providers and pharma to help them achieve their objectives at-scale. I can tell you from my early days with the team and from meetings with our partners and prospects, there is a lot to be excited about here. But our competitive advantage is not just our neighborhood footprint and convenience with 10 million customers visiting us at Walgreens in-store or online every day.
Our stores are access points on the best corners in America. And more specifically, we have over 85,000 people on our teams who directly engage with patients and our trusted providers in their communities. Walgreens has the unique ability through our well-established physical presence and iconic brand for our people to drive trusted meaningful connections.
We are enabling pharmacists to spend less time on tasks and more time on meaningful interactions and providing essential care. From health screenings to immunizations, to diagnostic testing and treatment. Our network of microfulfillment centers is helping to stabilize staffing and pharmacy hours, reduce workflow pain points and free-up capacity to drive the outcomes that matter most to our patients and partners.
You'll remember, in October, we mentioned a pause in the rollout to optimize productivity. We are happy with our continued progress and the importance of these centers in our overall strategy. We are also piloting virtual pharmacy to redefine connected care, further increase patient access, enhance workplace flexibility and extend our pharmacists' reach.
Finally, we are partnering with Academia, and specifically key schools of pharmacy to explore ways to attract, recruit and create a dynamic workplace for the next-generation of pharmacists. Our relationships with pharmacy Deans are integral to our strategy and can help us advance the profession, and so, we are forming an advisory council to guide us in our transformation. I look forward to personally working with the Deans with our first meeting in March, to ensure Walgreens is the preferred employer in the pharmacy space. And I want to thank our pharmacy teams for their tireless efforts on the frontlines of healthcare delivery in this country.
Let me give you one example of how we can build on our established assets in a capital-efficient way to expand services and support patients and partners, our clinical trials offering. We are partnering with pharma companies and leveraging our community presence and patient engagement to help drive greater patient diversity in clinical research. In a short span, we are already improving participation and equity at double the national average.
To date, we have signed over 25 contracts with a robust pipeline of opportunities ahead. Shields is another example of our strength, serving hospital systems and has consistently delivered strong margin-accretive results ahead of plan. Sales were up 27% in the first quarter, driven by meaningful growth at existing customers as well as new partner contract signings. We expect Shields continue to leverage and benefit from the rapid growth in the broader specialty market and our intense focus on accelerating hospital-owned specialty pharmacy programs.
Our specialty pharmacy assets will be an important focus going forward. And while we have work to do, we are pleased to be executing our next steps with gene and cell therapy. The FDA anticipates approval of more than 20 gene and cell therapies by 2025, and this is an exciting opportunity for patients with rare conditions and for Walgreens specialty pharmacies. In the coming months, you will hear more from us on our initiatives in specialty.
Finally, let me touch on reimbursement models and dynamics. We continue to see the benefits of more comprehensive and responsive discussions with payers, as they are realizing the broad set of value drivers that WBA can deliver. We are committed to and entering into pay-for-performance contracts beyond core dispensing, as we advance our adherence and outcomes capabilities within our pharmacy platform.
In addition, we welcome and we'll work with payer and PBM partners on any model, that recognizes and reimburses pharmacies for the unmatched value we provide patients, including pharmacy services, as well as those models that can ensure more transparency and predictability in reimbursement.
With that, I'll hand it over to Manmohan to review our financial results and recent execution in further detail.
