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Walgreens announced that it will shutter 1,200 stores over the next three years — and 500 locations in 2025 alone — as the drugstore giant seeks to slash $1 billion in costs.
The Chicago-based pharmacy chain, which has around 8,700 locations nationwide, told analysts on Tuesday that one in four of its stores are unprofitable.
The closures were announced in June but the company had not disclosed the number of affected stores at that time. At the time, Walgreens said it could shutter up to a quarter of stores, which is more than 2,000 locations.
The company has been hit by sluggish consumer spending amid stubbornly high inflation, as well as low drug reimbursement rates, which is the amount of money that healthcare providers or pharmacies are paid for dispensing prescription medications to patients.
Walgreens’ stock is trading near 30-year lows and down 65% this year, making it the worst performing stock on the S&P 500 index.
Shares of Walgreens rose more than 4% in pre-market trading on Tuesday as investors reacted positively to the company’s latest earnings report.
Walgreens narrowly beat Wall Street’s lowered estimates for fourth-quarter adjusted profit, and forecast fiscal-year earnings that were mostly in-line with expectations.
Tim Wentworth, the company CEO, has unveiled a series of changes since taking on the top job last year, including the removal of multiple mid-level executives and a $1 billion cost-cutting program.
“This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term,” Wentworth said in a statement.
In the fourth quarter of its fiscal year 2024, Walgreens said it recorded impairment charges on the goodwill of home care provider CareCentrix and equity investment in China.
Excluding those items and other charges, the company earned 39 cents per share on an adjusted basis. Analysts had expected a profit of 36 cents per share, according to data compiled by LSEG.
Comparable retail sales fell 1.7%, hurt by “a challenging retail environment”. Sales of groceries and other items at Walgreens stores have been hit as consumers increasingly hunt for bargains and shun higher-priced items.
For fiscal 2025, Walgreens said it expects adjusted earnings of $1.40 to $1.80 per share, versus estimates of $1.73 per share.
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