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Walgreens cuts profit forecast, looks to close more stores due to sluggish spending
By Bhanvi Satija and Sneha SK
(Reuters) -Walgreens Boots Alliance (WBA) cut its profit forecast for fiscal 2024 and said it would close more underperforming stores in the U.S. as weak consumer spending hurts retail operations, dragging its shares down 20% on Thursday -fair.
Without specifying the number of closures, the pharmacy chain operator said it was finalizing a “significant multi-year” program to close some of its more than 8,700 stores and that the company’s review focused on a quarter of its U.S. locations.
CEO Tim Wentworth, who took the helm last October, has begun a complete overhaul of Walgreens through store closures, the firing of several mid-level executives and a $1 billion cost-cutting plan.
The drugstore operator also cut its dividend in half to 25 cents a share earlier this year in a bid to save money as persistent inflation reduces spending on over-the-counter products and increases pressure on payment payments. reimbursement for prescription fills.
“This morning’s results were absolutely terrible. I mean, that’s been the theme of 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 track record in the health care industry,” but investors are focused on his next steps, said Wagner, whose company owns 241,583 shares of Walgreens through a unit.
The company expects challenges to persist into fiscal 2025 and is open to closing stores other than those being analyzed.
“We have a very strong level of conviction around the core business (pharmaceutical retail) that we are reshaping here, it will be a very different Walgreens,” Wentworth said on a conference call with analysts.
Walgreens also aims to simplify 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.
The company has 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 US, according to a regulatory filing.
The company forecast adjusted earnings of $2.80 to $2.95 per share for the financial year ending August, lower than the range of $3.20 to $3.35 per share announced in March. Analysts expect full-year earnings of $3.20 per share, according to LSEG data.
The forecast cut also weighed on rival CVS Health (CVS) shares, which caused them to fall about 5% in early trading.
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Walgreens reported third-quarter adjusted earnings of 63 cents per share, compared with estimates of 68 cents.
(Reporting by Bhanvi Satija, Christy Santhosh and Sneha SK in Bengaluru; Editing by Devika Syamnath)