Walgreens to Shut 1,200 Stores in Bold Turnaround Amidst Financial Struggles

Walgreens Boots Alliance has announced a strategic restructuring plan involving the closure of approximately 1,200 stores across the United States over the next three years. This decision, driven by CEO Tim Wentworth, aims to revitalize the company amidst challenges such as decreased consumer spending and low reimbursement rates for pharmaceuticals.

The company has reported that its fourth-quarter adjusted earnings slightly exceeded modest expectations, aligning with analysts' projections. However, Walgreens continues to grapple with one of its most difficult periods, as customers increasingly prefer low-cost alternatives and face mounting pressure from intermediaries on payment for prescription services.

The stock performance of Walgreens has been notably poor, reaching its lowest trading prices in nearly three decades. The company has experienced a 65% decline this year, making it one of the worst-performing stocks in the S&P 500 index.

Since taking the helm last year, CEO Wentworth has introduced several transformative initiatives, including streamlining the executive team and implementing a $1 billion cost reduction strategy. He expressed confidence that, despite requiring time, these changes would result in significant financial and consumer benefits in the long term.

Details about the store closures, initially mentioned in June, were only recently confirmed. The company operated over 8,000 stores in the United States as of August last year. The announced store closures are part of Wentworth's broader strategy to build a healthier store base and adapt to changing consumer behaviors and purchasing preferences.

During the 2024 fiscal year, Walgreens faced considerable difficulties, including a notable $30 billion net loss in the fourth quarter. To counteract these challenges, the company has exceeded its cost-cutting goals, employing measures such as closing underperforming stores and enhancing supply chain efficiency through AI.

Looking ahead to the 2025 fiscal year, Walgreens projects adjusted earnings per share between $1.40 and $1.80, aligning closely with analyst estimates of $1.73 per share. The store closures are expected to immediately boost adjusted EPS and free cash flow, providing a stronger footing for the company’s future.