Walgreens Boots Alliance (WBA, Financial) has announced a significant restructuring plan, which includes closing 1,200 stores in the United States over the next three years. This decision is part of CEO Tim Wentworth’s strategy to revitalize the company, which is struggling with reduced consumer spending and low drug reimbursement rates. Despite these challenges, the company reported adjusted fourth-quarter earnings slightly exceeding Wall Street’s modest expectations and aligned with analysts' forecasts for the fiscal year.
Walgreens is navigating one of its most challenging periods as customers increasingly opt for cheaper products, and the company faces rising payment pressures for prescription services from intermediaries. Walgreens' stock has been underperforming, trading at nearly a 30-year low with a 65% decline this year, marking it as the worst-performing stock in the S&P 500 index.
Since assuming leadership last year, CEO Wentworth has initiated several changes, including streamlining the executive team and implementing a $1 billion cost-cutting plan. Wentworth expressed confidence that the transformation would yield significant financial and consumer benefits in the long term, despite requiring time.
The store closure plan was initially announced in June, but the specific number of closures was only recently revealed. As of August 31 of last year, Walgreens operated over 8,000 stores in the United States.
In the fourth quarter of the 2024 fiscal year, the company recognized impairments related to goodwill with home care provider CareCentrix and equity investments in China. After adjusting these and other expenses, Walgreens reported earnings of 39 cents per share, surpassing the expected 36 cents per share based on LSEG data.
Comparable retail sales fell by 1.7%, attributed to what the company described as a "challenging retail environment." Sales of groceries and other products declined as consumers increasingly opted for cheaper alternatives while avoiding high-priced items.
Looking ahead to the 2025 fiscal year, Walgreens forecasts adjusted earnings per share between $1.40 and $1.80, close to analysts' estimates of $1.73 per share.
