Walgreens revealed plans to close 1,200 of its stores over the course of the next three years, including 500 by 2025, as part of a strategy aimed at reducing expenses by $1 billion.
The pharmacy chain, headquartered in Chicago and operating approximately 8,700 stores across the U.S., informed analysts on Tuesday that around 25% of its locations are currently not profitable.
Though the closures were initially announced in June, the company had not previously specified the exact number of stores that would be affected. At that time, Walgreens indicated that it might close as many as a quarter of its locations, amounting to over 2,000 stores.
The company has faced challenges due to reduced consumer spending driven by persistently high inflation, along with lower reimbursement rates for medications. These rates refer to the payments that pharmacies receive from healthcare providers for dispensing prescription drugs.
Walgreens stock is currently trading at levels not seen in nearly three decades, with a 65% decline in value this year, making it the worst-performing stock in the S&P 500.
However, in pre-market trading on Tuesday, shares rose by more than 4%, as investors responded favorably to the company’s latest earnings report.
Walgreens slightly exceeded Wall Street’s reduced expectations for adjusted profit in the fourth quarter and provided an earnings outlook for the next fiscal year that largely met analysts’ predictions.
Since becoming CEO last year, Tim Wentworth has introduced several key changes, including the elimination of numerous mid-level management positions and the implementation of a $1 billion cost-reduction initiative.
“This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term,” Wentworth stated.
In its fiscal fourth quarter of 2024, Walgreens reported charges related to the impairment of goodwill from home care provider CareCentrix and its equity investment in China.
After excluding those charges and other items, the company reported adjusted earnings of 39 cents per share, slightly beating the 36 cents per share anticipated by analysts, according to data from LSEG.
Comparable retail sales declined by 1.7%, impacted by what the company described as “a challenging retail environment.” Sales of groceries and other products have slowed as more consumers are opting for cheaper alternatives and avoiding higher-priced goods.
For fiscal 2025, Walgreens anticipates adjusted earnings to range between $1.40 and $1.80 per share, compared to the $1.73 per share expected by analysts.
{Matzav.com}