Walgreens is set to close approximately 1,200 of its stores throughout the United States over the next three years, as the company aims to revitalize a waning domestic business that was largely responsible for a staggering $3 billion loss in a recent quarterly report.
On Tuesday, the company announced that about 500 locations will shutter in the current fiscal year, which is anticipated to provide immediate support for adjusted earnings and free cash flow. Specific details about which stores will close have yet to be revealed.
The Deerfield, Illinois-based chain operates roughly 8,500 stores across the United States and several thousand internationally, with all the planned closures occurring domestically.
In late June, Walgreens Boots Alliance Inc. officials indicated they were in the process of finalizing a strategy to turn around its U.S. operations, a move that could involve shutting down numerous underperforming stores. Tuesday’s plan also encompasses the closure of 300 stores previously approved under an earlier cost-reduction initiative.
Walgreens CEO Tim Wentworth described fiscal 2025, which began just last month, as a pivotal “rebasing year” for the chain. He emphasized, “This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term.”
Walgreens has been encountering significant challenges similar to those faced by its competitors, stemming from low reimbursement rates for prescriptions and escalating operational costs. Additionally, the drugstore sector is contending with increased competition from online retail giants such as Amazon, as well as traditional competitors like Walmart and Target.
CVS Health Corp, a rival in the industry, is completing a three-year strategy that will see the closure of 900 stores, while Rite Aid Corp. emerged from bankruptcy earlier this year, reducing its store count to around 1,300 locations.
Walgreens has also reversed its plan to establish primary care clinics alongside some of its stores, a move initiated under former CEO Rosalind Brewer’s aggressive expansion strategy.
Furthermore, the company announced in August that it is evaluating its U.S. healthcare segment and might consider selling all or part of its VillageMD clinic business. This was a shift from a previous commitment to invest billions into expanding the healthcare segment, made less than two years ago.
At the start of 2024, Walgreens made moves to conserve cash by cutting the dividend to shareholders, allowing for reinvestment into its business growth. In June, the drugstore chain also reduced its earnings forecast for the fiscal year.
In its latest report, Walgreens disclosed a net loss exceeding $3 billion in the final quarter of 2024, attributing this decline to weaker performance in U.S. retail and pharmacy, as well as significant charges related to opioid litigation and an equity investment in China.
Despite the gloomy outlook, the company’s performance managed to exceed Wall Street expectations. Analysts had predicted earnings of 36 cents per share on $35.75 billion in revenue for the fiscal fourth quarter, according to FactSet. Walgreens projects its adjusted earnings for the coming fiscal year to fall between $1.40 and $1.80 per share, with U.S. healthcare and international business growth offsetting declines in retail pharmacy sales.
For fiscal year 2025, analysts are forecasting adjusted earnings of $1.72 per share. However, Leerink Partners analyst Michael Cherny noted that while the fourth-quarter results and outlook for 2025 were better than feared, the information released does not clarify the major questions surrounding the Walgreens Boots Alliance’s future direction under the leadership of the newly appointed CEO, Tim Wentworth.
Following the report, Walgreens’ shares rose nearly 4% before the market opened, although the stock has plummeted by almost two-thirds over the year, closing at $9 on Monday.
