FX.co ★ Walgreens To Close 1,200 US Stores

Walgreens has revealed its strategy to shutter approximately 1,200 U.S. stores over the coming three years, with about 500 of these closures anticipated in fiscal year 2025. This decision comes as the pharmacy giant navigates an increasingly competitive retail landscape within the United States.

This announcement coincided with Walgreens reporting a substantially larger net loss for its fourth quarter. The closures are projected to immediately enhance adjusted earnings per share and free cash flow. The company also forecasts expansion in both its healthcare and international divisions.

The specified store closures include around 300 locations previously earmarked under the Transformational Cost Management Program. During the fourth-quarter earnings call, CEO Tim Wentworth outlined that the extended footprint optimization initiative aims to curtail fixed expenses tied to these outlets. He emphasized the company's commitment to redeploy a majority of the workforce from the affected stores, consistent with Walgreens' historical practices.

Wentworth stated, “By executing this program, we aim to realign our store footprint to foster a healthier base that can better adapt to evolving consumer behavior and purchasing trends. Enhancing our responsiveness to the shifting market was a pivotal goal of our strategic review. We seek to close the competitive gap with our peers who have made similar investments over recent years.”

Out of Walgreens’ more than 8,000 stores, about 6,000 remain profitable. The company intends to allocate resources towards these profitable locations in the years ahead, prioritizing investment in stores expected to benefit from the redistribution of prescriptions, merchandise, and customer foot traffic from shuttered stores.

For the remaining underperforming stores, post the decision to close 1,200 locations, Walgreens is evaluating 800 sites, with a focus on enhancing their operational performance and cash flow.

Wentworth further noted that in fiscal year 2025, the company's focus will be on stabilizing the retail pharmacy sector by optimizing its footprint, managing operating costs, enhancing cash flow, and addressing reimbursement models to support dispensing margins while preserving future patient access.

“Fiscal 2025 will be a critical year of repositioning as we advance our strategy to drive value creation," Wentworth added. "Although this turnaround will take time, we are confident it will ultimately lead to significant financial and consumer benefits over the long run.”

Following the fourth-quarter report, Walgreens' stock rose approximately 16 percent during Tuesday's regular trading session, buoyed by earnings and sales that surpassed market expectations. However, the stock saw a slight decline, trading around 1 percent lower in Wednesday’s pre-market session on the Nasdaq.