Walgreens Boots Alliance said on Tuesday it would shut 1,200 stores over the next three years.
The announcement came as the new chief executive Tim Wentworth plotted a turnaround at the struggling pharmacy chain operator hit by sluggish customer spending and low drug reimbursement rates.
The company also narrowly beat Wall Street’s lowered estimates for fourth-quarter adjusted profit, and forecast fiscal-year earnings that were mostly in line with expectations.
Its shares jumped 5.4% to $9.50 in premarket trading.
Michael Cherny, an analyst at Leerink Partners, said, “At first blush, (the forecast) looks better than worst-case scenario.”
Cherny added that Walgreens continues to be buffeted by macro challenges that did not abate in the quarter.
Pharmacy chains are facing multiple challenges as consumers avoid high-priced grocery items and pressures mount on payments they receive from drug middlemen for filling prescriptions.
As a result, Walgreens’ stock is trading near 30-year lows and is down 65% this year, making it the worst performer on the S&P 500 index.
Changes
Wentworth has revealed a series of changes since taking on the role last year, including the removal of multiple mid-level executives and a $1 billion cost-cutting programme.
He said in a statement, “This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term.”
Walgreens originally announced the closures in June but it did not disclose the number of affected stores at the time.
It had over 8,000 stores in the United States as of 31 August last year.
In the fourth quarter of its fiscal year 2024, Walgreens recorded goodwill impairment charges related to its home care unit CareCentrix and equity investments in China.
It reported a loss of $3 billion on a reported basis, versus $180 million a year ago.
Excluding those items and other charges, the company earned 39 cents per share.
Analysts had expected a profit of 36 cents per share, according to data from the London Stock Exchange Group.
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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