Walgreens to shut 1,200 stores as CEO Wentworth seeks turnaround
By Manas Mishra and Sneha S K
(Reuters) -Walgreens Boots Alliance said on Tuesday it would shut 1,200 stores over the next three years as new CEO Tim Wentworth plots a turnaround at the struggling pharmacy chain operator hit by sluggish consumer spending and low drug reimbursement rates.
The company narrowly beat Wall Street’s lowered estimates for fourth-quarter adjusted profit, and forecast fiscal-year earnings that were mostly in line with expectations.
Its shares jumped 12.3% to $10.11 in morning trade. The stock has fallen 65% this year, up to its last close, making it the worst performer on the S&P 500 index.
“At first blush, (the forecast) looks better than worst-case scenario,” said Leerink Partners analyst Michael Cherny, adding that Walgreens continues to be buffeted by macro challenges that did not abate in the quarter.
Pharmacy chains are facing multiple challenges as consumers avoid high-priced grocery items and pressures mount on payments they receive from pharmacy benefit managers for filling prescriptions.
CEO Wentworth has unveiled a series of changes since taking on the top job last year, including the removal of multiple mid-level executives and a $1 billion cost-cutting program.
“This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term,” Wentworth said in a statement.
Walgreens said it will close 500 stores in 2025 and focus on locations that are cash-flow negative, and underperforming stores where the lease expirations are due in the next few years, CFO Manmohan Mahajan said. It had over 8,000 stores in the United States as of Aug. 31 last year.
In the fourth quarter of its fiscal year 2024, Walgreens recorded goodwill impairment charges related to its home care unit CareCentrix and equity investments in China. It reported a loss of $3 billion on a reported basis, versus $180 million a year ago.
Excluding those items and other charges, the company earned 39 cents per share. Analysts had expected a profit of 36 cents, according to data compiled by LSEG.
For fiscal 2025, Walgreens said it expects adjusted earnings of $1.40 to $1.80 per share, versus estimates of $1.73.