Walgreens on Thursday said it could shutter up to a quarter of its more than 8,600 US locations amid plunging retail sales as inflation-battered shoppers cut back on spending.
The struggling drug store chain, which closed 150 US locations last year, cut its profit forecast ahead of reporting its quarterly earnings — sending the company’s stock plummeting by nearly 25% in mid-day trading.
Walgreens CEO Tim Wentworth, who took over the 123-year-old company in October, cited “persistent pressures on the US consumer and the impact of recent marketplace dynamics, which have eroded pharmacy margins” for the lowered expectations.
He announced a turnaround plan that includes closing underperforming stores, the removal of multiple mid-level executives and a $1 billion cost-cutting initiative.
“Approximately 25% of Walgreens stores are not contributing to our long-term strategy,” a Walgreens representative told The Post.
“We’re finalizing an optimization program that we expect will include closing a significant portion of these locations over the next three years.”
The Deerfield, Ill.-based company, which lowered prices on over 1,300 products back last month, did not specify exactly how many stores will be shut.
“The consumer is absolutely stunned by the absolute prices of things, and the fact that some of them may not be inflating doesn’t actually change their resistance to the current pricing,” Wentworth told CNBC.
The company revealed adjusted earnings per share are down 36.6% on a constant currency basis due to “a challenging US retail environment.”
It forecast an adjusted profit of $2.80 to $2.95 per share for its financial year ending August, lower than the $3.20 to $3.35 per share range it announced in March.
Analysts expect an annual profit of $3.20 per share, according to LSEG data.
Walgreens stock sank to $11.93 Thursday, down 24.3%.
The company had halved its dividend to 25 cents per share earlier this year in an attempt to conserve cash as sticky inflation dampens spending on over-the-counter products and pressure increases on reimbursement payments for filling prescriptions.
“The results this morning were just absolutely terrible. I mean, it’s kind of been the theme over the last three to eight earnings reports to be brutally honest,” said David Wagner, portfolio manager and equity analyst at Aptus Capital Advisors.
“They brought in new CEO Tim Wentworth and he has a good history on the healthcare services side,” but investors are focused on his next steps, added Wagner, whose firm owns 241,583 Walgreens shares through a unit.
Walgreens is also aiming to simplify its US healthcare portfolio that includes primary care provider VillageMD.
Wentworth told the Wall Street Journal that the company will no longer be VillageMD’s majority owner.
The company also conducted a review of its Boots UK business and concluded it will continue to invest in it, he said on a conference call.
As of February, Walgreens had closed 484 stores in the UK and 625 stores in the U.S., according to a regulatory filing.
“We have a really strong level of conviction around the core business (retail pharmacy) that we are remodeling here, will be a very different Walgreens,” Wentworth said on a call with analysts.
Wentworth was named CEO after former CEO Rosalind Brewer announced her departure after a rocky, two-and-a-half-year tenure.
[Notigroup Newsroom in collaboration with other media outlets, with information from the following sources]
