Walgreens announced plans to close around 1200 locations over the next three years as part of a strategic move to revamp its struggling US business.
The company stated that approximately 500 store closures are expected within the current fiscal year to support adjusted earnings and free cash flow but did not specify the locations.
The big picture: Walgreens currently operates about 8500 stores in the United States and several thousand overseas, with all the store closures set to take place in the US.
- The decision to close stores is part of a larger turnaround plan set by Walgreens Boots Alliance Inc. leaders to reinvigorate the company’s US business, likely resulting in the closure of underperforming stores.
Driving the news: As of late June, the company was finalizing this turnaround plan, which now includes the closure of 300 stores previously approved under a cost-cutting program.
- The company, like its competitors, has grappled with challenges such as tight prescription reimbursement rates and escalating operational costs.
- Walgreens had previously embarked on initiatives, like adding primary care clinics beside stores under former CEO Rosalind Brewer, but subsequently re-evaluated these plans.
Go deeper: In August, Walgreens disclosed a review of its US healthcare business, potentially leading to the sale of its VillageMD clinic business, following significant investments in its expansion.
- The company began 2024 by reducing shareholder dividends to bolster cash reserves for business growth, significantly revising its fiscal forecast downwards in June.
- In the final quarter of 2024, Walgreens reported a net loss exceeding $3 billion, with adjusted earnings at 39 cents per share and an impressive 6% sales growth to $37.5 billion.
- Analysts were pleasantly surprised by Walgreens’ performance, with the company currently projecting adjusted earnings between $1.40 and $1.80 per share for the new fiscal year.
What we’re watching: Despite challenges in the US retail pharmacy sector, Walgreens anticipates growth from its US healthcare and international businesses to offset the decline.
