US pharmacy store chain Walgreens has announced that it will be closing 1,200 stores over the next few years to boost cash flow and recover earnings.
The company will prioritize closing underperforming stores or those with a lease soon to expire. However, Walgreens didn’t provide a list of the stores that will be closed other than stating it will be existing ones in the US. This means that its “Boots” pharmacies in the UK won’t be affected.
According to the AP, Walgreens CEO Tim Wentworth told analysts that about 6,000 locations are still profitable.
The decision comes as the company announced a fiscal 2024 loss per share of $10.01, 180.4% higher compared to fiscal 2023. Q4 operating loss in 2024 was $978 million, up 117.1 percent compared to the year-ago quarter.
Regarding the company’s performance this year, Wentworth stressed that the Deerfield, Illinois company will focus on improving cash flow next year.
“Our financial results in the fiscal fourth quarter and full year 2024 reflected our disciplined execution on cost management, working capital initiatives and capex reduction. In fiscal 2025, we are focusing on stabilizing the retail pharmacy by optimizing our footprint, controlling operating costs, improving cash flow, and continuing to address reimbursement models to support dispensing margins and preserve patient access for the future,” said Tim Wentworth.
Adding: “Fiscal 2025 will be an important rebasing year as we advance our strategy to drive value creation. This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term.”
After announcing the planned closing of stores, shares in the company rose by 14%.
According to Bloomberg, Walgreens’s profit guidance “met Wall Street estimates”. For reference, Walgreens said that for fiscal 2025, it expects adjusted EPS of $1.40 to $1.80.
Regarding Walgreens’s measures, Neil Saunders, Managing Director of GlobalData Retail, was quoted by The Press Democrat as saying: “All these things have the potential to undercut store performance and Walgreens needs to ensure that this does not happen.”
Opinion:
The difficult decision by Walgreens to close thousands of stores should help it regain some of its financial footing. However, it also reflects challenges that many other brick-and-mortar retailers face as the new wave of online competition changes how consumers buy pharmacy goods. The strategy, which was welcomed by investors (evident by the surge in its share price), seems measured given the current market. However, the company is now tasked with ensuring its cost-saving plan upholds customer loyalty – especially in areas affected by the closures.