By Walgreens Boots Alliance has announced plans to shutter 1,200 stores across the US over the next three years as the company embarks on a comprehensive turnaround strategy under new CEO Tim Wentworth.
Faced with declining consumer spending and lower reimbursement rates for prescription drugs, Walgreens is experiencing one of its most challenging periods in recent history.
Wentworth has introduced a series of cost-cutting measures, including a $1 billion savings programme, while also focusing on restructuring the company to improve long-term profitability. The closures, revealed in June, will affect 15% of its US store base.
Walgreens shares surge despite struggles
Despite these operational setbacks, Walgreens narrowly exceeded Wall Street’s estimates for its fourth-quarter profit.
The company reported an adjusted earnings per share (EPS) of 39 cents, beating analysts’ forecasts of 36 cents.
Walgreens’ fiscal year 2025 adjusted earnings are projected to range from $1.40 to $1.80 per share, compared to the $1.73 per share that analysts had anticipated.
This guidance aligns closely with market expectations but underscores the company’s struggle to meet investor demands amid economic turbulence.
Walgreens stock remains under pressure, down 65% year-to-date
Even though Walgreens’ shares jumped by 9% to $9.80 in premarket trading following the profit report, the company’s stock remains near 30-year lows.
Walgreens has experienced a staggering 65% drop this year, making it the worst-performing stock on the S&P 500 index.
The stock’s significant decline reflects ongoing pressures from reduced consumer spending and the challenging financial environment facing pharmacy chains.
The broader market downturn has also been compounded by rising costs and reimbursement challenges from pharmaceutical middlemen.
Grocery sales hit hardest
Walgreens’ financial woes extend beyond store closures.
The company’s comparable retail sales fell by 1.7% in Q4, driven by a “challenging retail environment.”
Consumers are increasingly turning to bargain options, avoiding higher-priced items in grocery and other retail categories.
This has had a noticeable impact on Walgreens’ retail performance, as shoppers seek out lower-cost alternatives.
The company’s struggles mirror broader trends in the retail industry, where price-sensitive consumers are reshaping buying patterns in response to economic uncertainty.
Cost-cutting measures include $1 billion savings programme, executive shake-up
Along with store closures, Walgreens has implemented significant changes to reduce costs and streamline its operations.
Wentworth, who took over as CEO in 2023, has prioritised eliminating mid-level executives and cutting $1 billion in expenses.
The cost-cutting programme is expected to deliver long-term financial benefits, positioning Walgreens for a recovery in the coming years.
The company’s leadership has expressed confidence that these measures will improve both profitability and customer satisfaction, although the full impact is not expected to be felt immediately.
Future outlook
Looking ahead, Walgreens has provided a cautiously optimistic earnings forecast for fiscal 2025, with adjusted EPS expected to fall between $1.40 and $1.80 per share.
The company’s projections closely match analysts’ expectations, which predict earnings of $1.73 per share.
While these figures reflect some stability, the path to recovery remains uncertain.
Walgreens’ turnaround plan will need to address both immediate financial challenges and broader shifts in consumer behaviour if the company is to regain its position as a market leader.
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