Walgreens announced plans to close a significant number of its 8,700 US stores due to underperformance and lowered profit forecasts for fiscal year 2024.
According to Daily Mail, the pharmacy chain is targeting non-profitable locations, those in close proximity to each other, and those grappling with theft issues, according to CEO Tim Wentworth.
The Illinois-based company announced on Thursday, citing several challenges affecting its business. Walgreens also operates under the Duane Reade banner and has been facing a decline in sales, particularly in the US retail segment.
Following the announcement, Walgreens’s shares fell more than 15 percent in premarket trading. The company's stock value had already declined 40 percent for the year before the announcement.
Retail expert Neil Saunders criticized Walgreens for its high prices and lackluster deals, noting that these factors have contributed to the company's struggles. "The numbers from US retail – where sales plunged by 4 percent – are particularly disappointing, although not entirely surprising," Saunders said.
Walgreens has long been struggling to lose front-of-store customers, a trend exacerbated by the current cost-of-living crisis. Customers are increasingly seeking better deals elsewhere, finding Walgreens' prices uncompetitive compared to mass merchants.
While the exact number and locations of the store closures were not specified, the closures could affect a meaningful percentage of underperforming stores. CEO Tim Wentworth emphasized that the focus will be on locations that are not profitable, are situated close to each other, or are dealing with significant theft issues.
"It could shutter a 'meaningful percent' of the stores of the quarter-or-so locations that are underperforming," Wentworth said. The company did not immediately respond to a Reuters request for comment about the store closures.
In addition to the US store closures, Walgreens has already closed 484 stores in the UK and 625 stores in the US as of February 2024. The company plans to simplify its healthcare portfolio, including changes to its ownership stake in VillageMD.
CEO Tim Wentworth, who joined Walgreens in October of the previous year, is navigating the company through declining in-store demand and weak sales of COVID-related products. As part of its strategic adjustments, Walgreens will no longer be the majority owner of VillageMD.
The company also adjusted its profit forecast for fiscal year 2024, now predicting $2.80 to $2.95 per share, down from the previous forecast of $3.20 to $3.35 per share made in March. Analysts had expected an annual profit of $3.20 per share.
For the third quarter, Walgreens reported adjusted earnings of 63 cents per share, falling short of the estimated 68 cents per share. This shortfall reflects the ongoing challenges the company faces in a competitive retail environment.
In summary, Walgreens is closing a notable portion of its 8,700 US stores due to underperformance and a challenging retail environment. The company’s stock has suffered, with shares dropping significantly, and its profit forecast has been lowered. CEO Tim Wentworth is steering the company through these turbulent times with a focus on profitability and strategic adjustments.
