Walgreens Closing 1,200 Stores As Earnings Beat Projections

Topline

Walgreens will close 1,200 stores over the next three years after announcing fourth-quarter earnings on Tuesday that beat analyst expectations, as the pharmacy chain—which reported future “significant” store closures earlier this year—works to free up its cash flow.

Key Facts

Walgreens—which has about 8,700 stores in the U.S.—said Tuesday it would close about 1,200 stores by 2027, including 500 locations in 2025, which the company said would be “immediately accretive” to its adjusted earnings and free cash flow.

Earlier this year, Walgreens indicated it would close a “significant” number of its underperforming stores, after CEO Tim Wentworth said the company faced a “challenging” retail environment.

Employees affected by the closures will be reassigned to another location, Wentworth said.

Walgreens also announced adjusted earnings per share of 39 cents and revenue of $37.5 billion, ahead of analyst projections of 36 cents and $35.7 billion, respectively, according to FactSet.

Despite beating earnings estimates, Walgreens reported a net loss of $3 billion, or $3.48 per share, for the fourth quarter.

Tangent

Shares of Walgreens increased by over 13% to $10.18 after releasing its fourth-quarter report Tuesday morning, the largest jump by the stock since a 12.6% increase on March 12, 2020.

Surprising Fact

After announcing “significant” store closures on June 27, Walgreen’s shares fell by over 22%, the farthest fall for the stock—which went public in 1927—since at least 1972. The company’s share price also fell to its lowest level ($12.02) this century at the time, though it later fell to a new record low of $8.22 on Sept. 24.

Key Background

Wentworth told the Wall Street Journal that Walgreens, like other retail pharmacies, was losing revenue from prescription drugs and staffing shortages as they compete with Amazon’s online pharmacy business. Among the drugs Walgreens lost money on were the increasingly popular GLP-1 drugs Ozempic and Mounjaro, which are used for treating diabetes and weight loss. Walgreens’ stock has declined since acquiring a $5.2 billion controlling stake in VillageMD in 2021, later reporting a $6 billion charge earlier this year because of the declining value of its investment. Wentworth has suggested the company would divest from VillageMD, though plans to do so were still being worked out and it’s likely Walgreens would continue to retain a stake in the firm.

Further Reading