Walgreens Declares Store Closures Amid Positive Earnings Report --[Reported by Umva mag]

Walgreens Boots Alliance, Inc. said Tuesday that it would close around 1,200 stores over the next three years and close 500 it planned to shut in fiscal 2025 as part of a strategic move. That’s while the retail drugstore chain reported its fiscal fourth-quarter results above Street estimates, led by aggressive cost-cutting measures purportedly designed to turn the company around amidst deepening challenges in the industry.

Walgreens recently learned it runs about 8,700 stores in the United States and nearly a quarter of those are unprofitable. CEO Tim Wentworth said the action will lead to a “healthier store base” allowing the company to fit better with changing consumer behaviors and preferences. Most employees at stores to be closed will be retained, but the number of jobs lost is not known yet.

2024 was perhaps the most volatile for Walgreens where costs include a decline in consumer spend, stumbling primary care expansion efforts, and low pharmacy reimbursement. The company also outstripped the cut rate by bringing in of $1 billion solely based on store closures, workforce cuts, and supply chain efficiency powered by AI. Most savings, according to CFO Manmohan Mahajan, have come through the U.S. retail pharmacy segment.

Walgreens during the quarter ended on August 31 reported revenue of $37.55 billion for the three-month period against the analysts’ 6% year-on-year gain. The company, however posted a net loss of $3 billion, equating to $3.48 per share. The valuation allowance mainly caused the net loss due to opioid settlement liabilities. This compared with a net loss of $180 million, or 21 cents per share, in the same quarter of the previous year.

The company’s strategizing in cost management along with a decrease in capital expenditure brought adjusted earnings per quarter to 39 cents per share. Adjusted earnings for fiscal 2025 are expected to be within the projected range of $1.40-$1.80 for Walgreens per share, surpassing analysts’ forecasts.

The U.S. health-care business is another area of growth for Walgreens, with sales of $2.11 billion and 7.1% growth, thanks to its partnerships with both VillageMD and Shields Health Solutions. In comparison, retail pharmacy sales of $29.47 billion still offered a hope from last year but faced headwinds in declining reimbursement rates that remain a pressure on the pharmacy margins. Its international unit continues to shine where there were sales of $5.97 billion compared to last year.

In its move towards such a multi-faceted strategy, Walgreens aims to enhance its market position and operate in an ever-changing healthcare landscape.

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