Walgreens to Close Underperforming Stores

In response to persistent profitability challenges and eroding margins, Walgreens announced on Thursday its decision to close a substantial number of underperforming stores across the United States. This strategic move is part of a broader multi-year footprint optimization program aimed at enhancing the company’s overall efficiency and financial health.

Walgreens’ announcement also included a downward revision of its 2024 profit forecast, which triggered a notable drop in its shares during pre-market trading on Thursday. Over the past year, Walgreens’ stock has plummeted by more than 45%, reflecting investor concerns over the company’s financial trajectory.

Despite these setbacks, Wentworth highlighted the robust performance of Walgreens’ international and U.S. healthcare segments. He emphasized that the company’s strategic review is guiding efforts to bolster its core business in retail pharmacy, which remains central to the future of healthcare. Addressing critical issues with urgency, Walgreens is focused on unlocking new growth opportunities amidst a challenging industry landscape.

The exact number of closures among Walgreens’ extensive network of over 8,700 stores was not disclosed, but CEO Tim Wentworth indicated that a significant percentage of the underperforming locations would be affected. This decision comes amid a notably difficult operating environment for the retail pharmacy chain, exacerbated by pressures on the U.S. consumer and adverse marketplace dynamics impacting pharmacy margins.

The challenging retail environment was underscored by a 2.3% decline in same-store sales compared to the previous year. This decline was attributed to increased promotional activity and higher shrink levels, including inventory losses from theft. Consequently, Walgreens now projects its fiscal 2024 full-year adjusted earnings to range between $2.80 and $2.95 per share, a significant reduction from the previous estimate of $3.20 to $3.35 per share.

The company’s outlook reflects the broader struggles of brick-and-mortar retailers, as highlighted by David Nicholas, President of Nicholas Wealth Management. Nicholas remarked that the U.S. consumer continues to bear the burden of the global economy despite inflationary pressures.