Retail drugstore chain Walgreens plans to close roughly 1,200 stores over the next three years as its fiscal fourth-quarter results surpass Wall Street expectations despite enduring losses.
The closures are part of Walgreens’s efforts to steer out of a rough patch, as consumer spending is low and pharmacy profit margins shrink due to rising drug reimbursement rates.
The company’s fiscal 2024 sales increased 6.2 percent to $147.7 billion, with fourth-quarter sales at $37.5 billion, up 6 percent from last year.
Operating loss in fiscal 2024 doubled to $14.1 billion, with a net loss of $8.6 billion, a 180 percent increase compared to fiscal 2023, and a $3 billion net loss for this year’s final quarter.
On the bright side, the company exceeded its target of cutting $1 billion in costs during fiscal 2024.
“Our financial results in the fiscal fourth quarter and full year 2024 reflected our disciplined execution on cost management,” Walgreens Boots Alliance Inc. CEO Timothy Wentworth said in a Tuesday press release.
The company will focus on stabilizing its retail pharmacy for the next fiscal year.
“Fiscal 2025 will be an important rebasing year as we advance our strategy to drive value creation,” Wentworth said.
“This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term.”
The decision to close stores was announced in June during the third quarter (Q3) corporate conference call, but no exact number was given.
“Demographics and preferences have shifted, and we need to reposition and operate our stores accordingly,” Wentworth said during the call, explaining that 25 percent of the company’s U.S. stores were unprofitable.
“While it is not an easy decision to close a store, we will work to minimize customer disruptions,” Wentworth added. “And importantly, as we have done in the past, we intend to redeploy the vast majority of the workforce in those stores that we close.”
Of the 1,200 stores now announced to be closed, 500 will be shut down in fiscal year 2025 alone.
The remaining stores will be reorganized to increase profitability and improve customer experience. These efforts include expanding Walgreens’s e-commerce business and thoroughly reassessing the company’s assortment.
However, Wentworth added a caveat.
“We will contemplate additional closures if performance does not improve, which includes external factors such as reimbursement rates,” he said.
Walgreens, founded in 1901, currently employs about 312,000 people in 12,500 locations across the United States, Europe, and Latin America. Walgreens Boots Alliance includes consumer brands Boots, Duane Reade, the No7 Beauty Company, and Benavides in Mexico.