By Manas Mishra and Sneha SK
(Reuters) -Walgreens Boots Alliance said on Tuesday it would close 1,200 stores over the next three years as new CEO Tim Wentworth plans a turnaround at the struggling pharmacy chain operator, hit by sluggish spending. consumers and low drug reimbursement rates.
The company narrowly beat Wall Street's lowered estimates for fourth-quarter adjusted earnings and forecast earnings for the fiscal year that were mostly in line with expectations.
Its shares rose 12.3% to $10.11 in morning trading. The stock has fallen 65% this year, through its last close, making it the worst performer in the market.
“At first glance, (the forecast) looks better than the worst-case scenario,” said Leerink Partners analyst Michael Cherny, adding that Walgreens continues to be buffeted by macroeconomic challenges that did not abate in the quarter.
Pharmacy chains face multiple challenges as consumers avoid high-priced grocery items and pressures increase on the payments they receive from pharmacy benefit managers for filling prescriptions.
Chief Executive Wentworth has revealed a series of changes since taking the top job last year, including the ouster of several mid-level executives and a billion-dollar cost-cutting program.
“This change will take time, but we are confident it will produce significant long-term financial and consumer benefits,” Wentworth said in a statement.
Walgreens said it will close 500 stores in 2025 and will focus on cash flow-negative locations and underperforming stores whose lease maturities expire in the coming years, Chief Financial Officer Manmohan Mahajan said. It had more than 8,000 stores in the United States as of August 31 of last year.
In the fourth quarter of its fiscal 2024, Walgreens recorded goodwill impairment charges related to its CareCentrix home care unit and equity investments in China. It reported a loss of $3 billion as reported, down from $180 million a year ago.
Excluding those items and other charges, the company earned 39 cents per share. Analysts expected a profit of 36 cents, according to data compiled by LSEG.
For fiscal 2025, Walgreens said it expects adjusted earnings of $1.40 to $1.80 per share, versus estimates of $1.73.
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