Walgreens cuts profit view, to close up to 700 US stores on spending hit
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[June 28, 2024]
By Bhanvi Satija and Sneha S K
(Reuters) -Walgreens Boots Alliance said on Thursday it plans to close
about 650 to 700 underperforming stores in the U.S., having cut its
profit forecast for fiscal 2024 as weak consumer spending hurt retail
operations.
It also plans to shut up to 650 Boots stores in the UK and expects to
record related pre-tax charges of between $3.8 billion and $4.1 billion,
according to a regulatory filing.
The drugstore operator's CEO Tim Wentworth, who came on board last
October, had set in motion a complete overhaul at Walgreens through
store closures, the removal of multiple mid-level executives and a $1
billion cost-cutting plan.
Walgreens had also halved its dividend to 25 cents per share earlier
this year in an attempt to conserve cash as sticky inflation dampens
spending on over-the-counter products and reimbursement payments for
filling prescriptions come under pressure.
"The results this morning were just absolutely terrible. I mean, it's
kind of been the theme over 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 history on the
healthcare services side", but investors are focused on his next steps,
said Wagner, whose firm owns 241,583 Walgreens shares through a unit.
Walgreens expects these challenges to persist into fiscal 2025 and is
open to reviewing more store closures.
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Pigeons are seen resting on signage for Walgreens, owned by the
Walgreens Boots Alliance, Inc., in Manhattan, New York City, U.S.,
November 26, 2021. REUTERS/Andrew Kelly/File Photo
"We have a really strong level of
conviction around the core business (retail pharmacy) that we are
remodeling here" and the changes will take a few "quarters ... and
not necessarily multiple years", Wentworth said.
Walgreens will also simplify its U.S. healthcare
portfolio that includes primary care provider VillageMD. Wentworth
told the Wall Street Journal the company will no longer be
VillageMD's majority owner.
It will, however, continue investing in its Boots UK and Shields
pharmacy businesses.
As of May 31, Walgreens had closed 581 stores in the UK and 673
stores in the U.S., according to a regulatory filing.
The company forecast an annual adjusted profit of $2.80 to $2.95 per
share, lower than its earlier estimate of $3.20 to $3.35. Analysts
expect $3.20 per share, according to LSEG data.
(Reporting by Bhanvi Satija, Christy Santhosh, Sneha S K, and Mariam
Sunny in Bengaluru; Editing by Devika Syamnath and Krishna Chandra
Eluri)
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