Bhanvi Satija and Sneha S.K.
(Reuters) – (The June 27 story has been corrected to remove a reference in the headline and first paragraph to Walgreens closing 700 U.S. stores because that figure had already been reported, and to remove a second paragraph that included references to the company’s store closures Boots and charge the appropriate fee since the information has already been communicated)
Walgreens Boots Alliance (NASDAQ:) cut its fiscal 2024 profit forecast and said it will close underperforming U.S. stores as weak consumer spending hurts retail operations.
The drugmaker’s CEO Tim Wentworth, who took over last October, has initiated a complete overhaul of Walgreens through store closures, the firing of several mid-level executives and a $1 billion cost-cutting plan.
Walgreens also halved its dividend earlier this year to 25 cents per share in an attempt to preserve cash as persistent inflation weighs down costs on over-the-counter products and prescription reimbursement payments come under pressure.
“The results this morning were absolutely terrible. I mean, that’s been the theme of the last three to eight earnings reports, to be perfectly honest,” said David Wagner, portfolio manager and equity analyst at Aptus Capital Advisors.
“They brought in a new CEO, Tim Wentworth, and he has a good history in the health care business,” but investors are focused on his next steps, said Wagner, whose firm owns 241,583 Walgreens shares through a unit.
Walgreens expects these challenges to continue into fiscal 2025 and is willing to consider closing more stores.
“We have very strong confidence that the core business (retail pharmacy) we’re redeveloping here,” and the changes will take a few “blocks … not necessarily a few years,” Wentworth said.
Walgreens will also streamline its U.S. healthcare portfolio, which includes primary care provider VillageMD. Wentworth told the Wall Street Journal that the company will no longer be the majority owner of VillageMD.
However, the company will continue to invest in its pharmacy businesses Boots UK and Shields.
As of May 31, Walgreens closed 581 stores in the U.K. and 673 stores in the U.S., according to a regulatory filing.
The company forecast full-year adjusted earnings of $2.80 to $2.95 per share, down from its previous estimate of $3.20 to $3.35. Analysts expect $3.20 per share, according to LSEG.