Home Economy Economic Activity Walgreens to close 1,200 U.S. stores as chain attempts to steady operations...

Walgreens to close 1,200 U.S. stores as chain attempts to steady operations at home

By

Tom Murphy

-

10/15/2024

Walgreens-Store Closures — A WALGREENS store in Bradenton, Fla. Walgreens plans to close about 1,200 locations over the next three years as the drugstore chain seeks to turnaround its struggling U.S. business. /ASSOCIATED PRESS FILE PHOTO/GENE J. PUSKAR

Walgreens will close about 1,200 locations over the next three years as the drugstore chain seeks to turn around a struggling U.S. business that contributed to a $3 billion quarterly loss. The company said Tuesday that about 500 store closures will come in the current fiscal year and should immediately support adjusted earnings and free

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Walgreens will close about 1,200 locations over the next three years as the drugstore chain seeks to turn around a struggling U.S. business that contributed to a $3 billion quarterly loss. The company said Tuesday that about 500 store closures will come in the current fiscal year and should immediately support adjusted earnings and free cash flow. Walgreens didn't say where the store closings would take place. Walgreens operates about 8,500 stores in the United States, including 23 in Rhode Island, and a few thousand overseas. All of the stores that will be closed are in the United States. Walgreens Boots Alliance Inc. leaders said in late June that they were finalizing a turnaround plan for its U.S. business, and that push could result in the closing of hundreds of underperforming stores. The plan announced Tuesday includes the closing of 300 stores that had been approved under a previous cost-cutting plan. Walgreens CEO Tim Wentworth said in a statement that fiscal 2025, which began last month, will be an important "rebasing year" for the drugstore chain. "This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term," he said. Walgreens, like its competitors, has been struggling for years with tight reimbursement for the prescriptions it sells as well as other challenges like rising costs to operate its stores. Plus drugstore chains have been dealing with more competition from online retail giant Amazon and Walmart and Target. Rival CVS Health Corp. is wrapping up a three-year plan to close 900 stores. Another major chain, Rite Aid Corp., emerged from a bankruptcy reorganization earlier this year after whittling its store count down to about 1,300 locations. Walgreens also has been backing away from a plan to add primary care clinics next to some if its stores after launching an aggressive expansion under previous CEO Rosalind Brewer. The Deerfield, Ill., company said in August that it was reviewing its U.S. healthcare business, and it might sell all or part of its VillageMD clinic business. That announcement came less than two years after the company said it would spend billions to expand the business. The company started 2024 by cutting the dividend it pays shareholders to get more cash to grow its business. The drugstore chain then slashed its forecast for fiscal 2024 in June. Walgreens said Tuesday that its net loss swelled to more than $3 billion in the final quarter of 2024. The company said a softer U.S. retail and pharmacy performance hurt. It also booked some hefty charges tied to opioid litigation settlements the company had recognized in previous quarters and an equity investment in China. The performance topped Wall Street expectations. Analysts expect, on average, earnings of 36 cents per share on $35.75 billion in revenue in the fiscal fourth quarter, according to FactSet. The company also said it expects adjusted earnings in the new fiscal year to fall between $1.40 and $1.80 per share, with growth in its U.S. healthcare and international businesses countering the U.S. retail pharmacy decline. For the fiscal 2025, analysts expect adjusted earnings of $1.72 per share. Leerink Partners analyst Michael Cherny said in a research note the company's fourth-quarter performance and 2025 forecast were not as bad as they could have been. But the information released Tuesday "does not answer any of the big questions surrounding the (Walgreens Boots Alliance) story and the improved operating path forward under still new CEO Tim Wentworth." Walgreens shares rose almost 4% Tuesday before the opening bell. The stock had shed nearly two thirds of their value so far this year, falling to $9 as of Monday's close. Tom Murphy is a business writer for The Associated Press.