(Corrects headline and first paragraph to remove reference to Walgreens closing 700 stores in the U.S. because that number has already been reported; removes second paragraph to mention that the company is closing Boots stores and charging related charges because that information Already reported)
Author: Bhanvi Satija and Sneha SK
(Reuters) – Walgreens Boots Alliance cut its profit forecast for fiscal 2024 and said it will close underperforming U.S. stores as weak consumer spending hurts its retail business.
The drugstore operator’s CEO, Tim Wentworth, took over in October and has overhauled Walgreens by closing stores, laying off many mid-level managers and implementing a $1 billion cost-cutting plan.
Walgreens also halved its dividend to 25 cents a share earlier this year in an attempt to conserve cash as inflation curbs spending on over-the-counter products and dispensing reimbursements come under pressure.
“The results this morning were absolutely terrible,” said David Wagner, portfolio manager and equity analyst at Aptus Capital Advisors. “I mean, honestly, this has been a theme in the last three to eight earnings reports.
“They hired a new CEO, Tim Wentworth, who has a good history in health care delivery,” but investors are focused on his next move, Wagner said. Owns 241,583 shares of Walgreens stock through one division.
Walgreens expects these challenges to continue into fiscal 2025 and is willing to consider additional store closures.
Wentworth said that “we have very strong beliefs in the core business that we are reinventing (retail pharmacy)” and that the changes will take “a few quarters … not necessarily years.”
Walgreens will also streamline its U.S. healthcare portfolio, which includes primary care provider VillageMD. Wentworth told the Wall Street Journal that the company will no longer be VillageMD’s majority shareholder.
However, it will continue to invest in its Boots UK and Shields pharmacy businesses.
As of May 31, Walgreens had closed 581 stores in the United Kingdom and 673 stores in the United States, according to regulatory filings.
The company expects adjusted annual profit of $2.80 to $2.95 per share, down from its previous forecast of $3.20 to $3.35. Analysts expected $3.20 per share, according to LSEG data.
