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Walgreens is the worst performing stock in the S&P 500 this year

Intel. Boeing. Lululemon. Dollar Tree. Paramount. All are having a terrible year, but none are down as much as Walgreens shares.

David Crowther

9/9/24 4:01PM

Updated 9/23/24 9:07AM

Squeezed by the rise of online pharmacies, falling reimbursement rates for prescription drugs, and giants like Amazon eating into their general retail sales, Walgreens investors have had a disappointing year — and nowhere does that show up more clearly than on the ticker tape.

Indeed, Walgreens (WBA) stock has now shed ~64% of its value this year, more than any other in the S&P 500 Index, per data from FactSet. Some shareholders are even suing the company and its management, alleging that they breached their fiduciary duty by inflating Walgreens’ performance projections.

An Rx for Walgreens

So, how does Walgreens turn its ship around? In recent years the company was betting on getting closer to patients, spending more than $5 billion to acquire a majority stake in VillageMD in 2021, as part of an effort to turn its stores into primary-care destinations, as well as just being prescription fillers.

That didn’t really work. Indeed, in June Walgreens announced that it would be cutting its stake in VilageMD, after the company booked an eye-watering $5.8 billion write-down of its value earlier this year. It also said it would begin to dramatically slim its store portfolio, with as many as one-quarter of its 8,600 stores set to close.

But Walgreens’ new CEO, who was appointed last October, doesn’t have the luxury of lots of time on his side. Not just because the company faces a number of headwinds, but because it has billions of dollars of debt.

As of May 31, the company had $703 million of cash and cash equivalents on its balance sheet and $8.9 billion of interest-bearing debt.

But it also has hundreds of leases. These are, primarily, agreements for the stores, warehouses, office space, and distribution centers that it rents. Although they aren’t technically “debt,” they can behave a lot like it. And, once included, the company’s financial position looks very different. Indeed, all told, the company reported having “Lease adjusted net debt” of $29.8 billion at the end of May.

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eBay stock slumps on gloomy Q4 outlook despite solid Q3 earnings

Shares of eBay fell as much as 10.5% in premarket trading on Thursday morning after the company gave a lower-than-expected profit forecast for the important holiday shopping season.

The e-commerce giant reported solid numbers for the third quarter on Wednesday, with revenue up 9% as reported to $2.8 billion and gross merchandise volume rising 10% to $20.1 billion, topping the average analyst forecast of $19.4 billion, per Bloomberg.

However, concerns about the future somewhat overshadowed these results.

eBay outlined its profit outlook for the period ending in December to $1.31 to $1.36 a share, with revenue at $2.83 billion to $2.89 billion. According to Bloomberg-compiled data, this broadly matches Wall Street’s estimates for the top line, but misses on the bottom line, with analysts forecasting EPS to come in at $1.39 — suggesting the company expects some further margin pressure.

The company has been facing macroeconomic challenges since the US ended the de minimis tariff exemption in late August, with the online marketplace reliant on shipments. One small silver lining? CFO Peggy Alford highlighted a “less durable trend” on a post-earnings call: that as commodity prices for precious metals boomed, demand for bullion and collectible coins on eBay spiked.