In this article, Walgreens reported fiscal fourth-quarter sales and adjusted profit that exceeded Wall Street’s expectations. The company is cutting costs to navigate a challenging period. Walgreens plans to close about 1,200 stores over the next three years, with 500 closures expected in fiscal 2025. These closures are projected to enhance adjusted earnings and free cash flow. Approximately a quarter of Walgreens’ 8,700 U.S. locations are deemed unprofitable.
The CEO, Tim Wentworth, stated that the closures will lead to a more robust store base, allowing the company to adapt to changing consumer behaviors. Walgreens aims to retain most affected employees, although the exact number of job losses is uncertain. Following the announcement, Walgreens’ shares surged over 15%.
The company faced challenges in fiscal 2024, including pharmacy reimbursement pressure and softer consumer spending. Walgreens exceeded its cost-cutting target of $1 billion during the fiscal year by closing underperforming stores, laying off workers, and enhancing supply chain efficiency using artificial intelligence. Most of the cost savings were seen in the U.S. retail pharmacy segment.
For the quarter ending August 31, Walgreens reported sales of $37.55 billion, a 6% increase from the previous year. The company recorded a net loss of $3 billion, or $3.48 per share, primarily due to a valuation allowance related to opioid settlements. Adjusted earnings were 39 cents per share for the quarter.
Walgreens’ fiscal 2025 guidance aligns with analysts’ expectations, anticipating growth in U.S. health care and international segments offset by a decline in the retail pharmacy segment. The company aims to enhance pharmacy margins by restructuring its relationship with pharmacy benefit managers. Walgreens projects adjusted earnings per share of $1.40 to $1.80 and revenue of $147 billion to $151 billion for the upcoming fiscal year.
In the fiscal fourth quarter, sales in Walgreens’ U.S. health-care unit rose to $2.11 billion, driven by growth in VillageMD and Shields Health Solutions. The U.S. retail pharmacy segment saw sales of $29.47 billion, with pharmacy sales up 9.6% and total prescriptions filled increasing by 1.7%. Retail sales declined due to a challenging retail environment.
The international unit, operating over 3,000 retail stores globally, reported $5.97 billion in sales for the fiscal fourth quarter. Sales from Boots, the U.K.-based drugstore chain, increased by 2.3%.
