by Benny Xie
NEW YORK, Oct. 15 (Xinhua) -- Walgreens Boots Alliance (WBA) announced on Tuesday that it will close 1,200 stores over the next three years as part of new CEO Tim Wentworth's strategy to turn around the struggling pharmacy chain.
The closures come amid challenges from sluggish consumer spending and reduced drug reimbursement rates, which have pressured the company's bottom line.
Walgreens narrowly beat Wall Street's lowered expectations for its fiscal fourth-quarter adjusted profit, reporting earnings of 39 cents per share on Tuesday, just above analysts' estimates of 36 cents. The company also forecasted fiscal-year earnings for 2025 between 1.40 U.S. dollars and 1.80 dollars per share, which is mostly in line with expectations.
Following the earnings report, Walgreens shares surged by 14.06 percent, reaching 10.26 dollars as of 3:30 p.m. on Tuesday, though the stock remained down 65 percent for the year, making it the worst performer on the S&P 500 index.
Wentworth, who took the helm last year, has introduced a series of significant changes to address the company's predicament, including the removal of several mid-level executives and the implementation of a 1-billion-dollar 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 fiscal 2025 starting from Sept. 1, Walgreens plans to close 500 stores, focusing on underperforming locations and those where lease expirations are imminent.
Walgreens CFO Manmohan Mahajan explained that the company will target stores that are cash-flow negative, emphasizing that Walgreens' store optimization is crucial to improving its financial health.
"We have over 8,000 stores, of which the majority -- approximately 6,000 -- are profitable," Wentworth said on the earnings call. "This solid base supports our conviction in a retail pharmacy-led model that is relevant to our consumers, and we intend to invest in these stores over the next several years."
He added that the store-closure plan "will realign our footprint to a healthier store base that we believe will enable us to respond more dynamically to shifts in consumer behavior and buying preferences."
The challenges facing Walgreens are part of broader pressures on the retail pharmacy sector, where rising grocery costs have deterred consumers and payments from pharmacy benefit managers have been squeezed.
Retail sales fell 3.5 percent, while comparable retail sales were down 1.7 percent, "reflecting a challenging retail environment and continued channel shift," Walgreens said.
Despite these headwinds, the company's fourth-quarter results provided some relief. Revenue rose 6 percent year on year to 37.5 billion dollars, and the U.S. retail pharmacy segment saw a 6.5 percent sales increase, while pharmacy sales jumped 9.6 percent.
However, Walgreens reported 3 billion dollars of net loss for the quarter, compared to 180 million dollars in the same period a year ago. This significant loss was driven by goodwill impairment charges related to its home care unit, CareCentrix, and equity investments in China. Excluding these charges, the company managed to post adjusted profits, bolstering investor confidence.
Analysts are cautiously optimistic about the company's future. "At first blush, the forecast looks better than a worst-case scenario," said Michael Cherny, an analyst at Leerink Partners. However, he noted that Walgreens continues to face macroeconomic challenges, which remain concerns for the company's recovery.
