Walgreens plans to close 1,200 U.S. stores to boost struggling business

Walgreens has announced plans to shut down around 1,200 stores over the next three years while the drugstore chain tries to reverse a struggling U.S. business that has reported a $3 billion loss in its latest quarterly report.

In a statement released on Tuesday, the company revealed that around 500 of the closures will take place in the current fiscal year to bolster adjusted earnings and free cash flow.

While Walgreens operates around 8,500 stores in the U.S., the exact locations set to close have not yet been revealed.

The decision follows an announcement from Walgreens Boots Alliance Inc. managers in June that a turnaround plan for its U.S. operations was in the works, likely involving the shutdown of numerous underperforming stores.

The newly announced plan includes the closure of 300 locations that had already been earmarked under a previous cost-reduction initiative.

CEO Tim Wentworth emphasized the importance of fiscal 2025, which began last month, describing it as a crucial “rebasing year” for the chain.

He said “This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term.”

Walgreens faces mounting challenges, including tighter reimbursement rates for prescriptions and increased operational costs.

The company also grapples with intensified competition from online retail giants including Amazon, as well as traditional competitors including Walmart and Target.

Rival CVS Health Corp. is currently finalizing a three-year plan to close 900 stores, while Rite Aid Corp. has recently emerged from bankruptcy after reducing its store count to about 1,300 locations.

In a shift in strategy, Walgreens has also stepped back from its earlier plan to expand primary care clinics adjacent to some of its stores, a project initiated under former CEO Rosalind Brewer.

In August, the Deerfield, Illinois-based company announced it was reviewing its U.S. health care operations and may consider selling all or part of its VillageMD clinic business, despite having previously committed billions to its expansion.

Earlier in 2024, Walgreens cut its dividend to conserve cash for growth and subsequently revised its fiscal 2024 forecast downward in June.

The company reported a net loss exceeding $3 billion for the final quarter of 2024, attributing the decline to weaker retail and pharmacy performance, alongside substantial charges related to opioid litigation settlements and an equity investment in China.

Despite these setbacks, the financial results exceeded Wall Street expectations. Analysts had anticipated earnings of 36 cents per share on revenues of $35.75 billion for the fiscal fourth quarter, according to FactSet.

Looking ahead, Walgreens expects adjusted earnings for the new fiscal year to range between $1.40 and $1.80 per share, with anticipated growth in its U.S. health care and international businesses partially offsetting the decline in U.S. retail pharmacy revenues. For fiscal 2025, analysts project adjusted earnings of $1.72 per share.

While the fourth quarter results and the 2025 forecast were better than some had feared, Leerink Partners analyst Michael Cherny noted that the information released does not clarify the broader challenges facing Walgreens Boots Alliance under the leadership of the relatively new CEO Tim Wentworth.

Following the announcement, Walgreens shares rose nearly 4% before the market opened, although the stock has lost nearly two-thirds of its value this year, closing at $9 as of Monday.

This article contains additional reporting from The Associated Press