Walgreens Boots Alliance announced on Tuesday its decision to close 1,200 stores over the next three years as new CEO Tim Wentworth seeks to revitalize the struggling pharmacy chain. The company has faced challenges due to sluggish consumer spending and declining drug reimbursement rates.
In addition to the store closures, Walgreens reported that it narrowly exceeded Wall Street's lowered expectations for fourth-quarter adjusted profits. The company's forecast for fiscal-year earnings was generally in line with analysts’ predictions. Following this news, Walgreens shares rose by 5.4% to $9.50 in pre-market trading.
Michael Cherny, an analyst at Leerink Partners, commented that the earnings forecast “looks better than the worst-case scenario,” but noted that Walgreens is still grappling with ongoing macroeconomic challenges.
The pharmacy industry is under pressure as consumers increasingly avoid high-priced grocery items, leading to reduced spending. Additionally, Walgreens faces mounting pressure from the payments it receives from drug middlemen for filling prescriptions. As a result, the company’s stock has fallen to near 30-year lows and has declined 65% this year, making it the worst performer on the S&P 500 index.
Since assuming leadership last year, Wentworth has implemented several changes, including the dismissal of multiple mid-level executives and a $1 billion cost-cutting initiative. In a statement, he acknowledged that while the turnaround process will take time, he is confident it will lead to substantial financial and consumer benefits in the long run.
The announcement of store closures was made in June, but Walgreens had not previously disclosed the total number of stores that would be affected. As of August 31 last year, the company operated over 8,000 stores in the United States.
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