On a day when Walgreens Boots Alliance reported another $3 billion in losses, the drugstore chain said it will close 1,200 stores over three years in an effort to return to profitability and long-term growth.
The drugstore chain, which has been dogged for much of this year by myriad operating issues including sagging retail sales and billions of dollars in losses on its VillageMD clinic investment, reported a net loss of $3 billion, or $3.48 per share, in its fiscal fourth quarter ended Aug. 31 compared to a net loss of $180 million, or 21 cents a share, in the year ago period.
In its quarterly earnings report released Tuesday morning, Walgreens said the bottom line was “primarily driven by a higher operating loss, a $2.3 billion non-cash charge for valuation allowance on deferred tax assets primarily related to opioid liabilities recognized in prior periods, and a non-cash impairment charge related to equity investment in China.”
Still, Walgreens said earnings were in line with analysts’ expectations and the store closures would be “immediately accretive to adjusted earnings per share and free cash flow.” In fiscal 2025, Walgreens is projecting adjusted earnings per share of $1.40 to $1.80.
Walgreens said the 1,200 closures of the 8,500 stores in the U.S. over the next three years include 300 stores “previously approved” under a company “transformational cost management program.” Walgreens said about 500 stores will close in its fiscal 2025, which began Sept. 1 of this 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,” said Walgreens chief executive officer Tim Wentworth, who took over a year ago from Roz Brewer.
Walgreens said fourth quarter sales increased 6% to $37.5 billion, “reflecting sales growth across all segments.” In particular, U.S. retail pharmacy sales were up 6.5% to $29.5 billion.
“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,” Wentworth said in a statement accompanying company earnings. ““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.”
Walgreens invested more than $6 billion in VillageMD under former CEO Brewer to take a controlling stake, but the company has already scaled back dramatically on the expansion of doctor practices and Village Medical clinics the company opened attached to Walgreens. The VillageMD investment hasn’t gone well and Walgreens executive said the clinics weren’t attracting enough patients.
On Tuesday, Walgreens said its operating loss in fiscal 2024 was $14.1 billion and the net loss for the year was $8.6 billion, or $10 a share. “(The) operating loss in the current period reflects a $12.4 billion non-cash impairment charge related to VillageMD goodwill, which resulted in a $5.8 billion charge attributable to WBA, net of tax and non-controlling interest,” Walgreens reported.
