Walgreens will lose another $3 billion and plans to close 1,200 stores

On a day when Walgreens Boots Alliance reported another $3 billion in losses, the drugstore chain said it will close 1,200 stores over three years in an effort to return to profitability and long-term growth.

The drugstore chain, which has been dogged by numerous operating issues for most of this year, including declining retail sales and billions of dollars in losses on its investment in the VillageMD clinic, reported a net loss of $3 billion, or $3.48 per share, in its fourth fiscal quarter. the quarter ended Aug. 31 compared with a net loss of $180 million, or 21 cents per share, in the same period last year.

In his quarter earnings report released Tuesday morning Walgreens said operating income was “primarily driven by an increased operating loss, a $2.3 billion non-cash charge for the valuation allowance on deferred tax assets primarily related to opioid liabilities recognized in prior periods, and a non-cash exceptional depreciation in connection with investments in shares. in China.”

Still, Walgreens said profits were in line with analyst expectations and that the store closures would be “immediately accretive to adjusted earnings per share and free cash flow.” For fiscal 2025, Walgreens expects adjusted earnings per share of $1.40 to $1.80.

Walgreens said the 1,200 closures of its 8,500 U.S. stores over the next three years include 300 stores that were “previously approved” under a “transformational cost management program” by the company. Walgreens said about 500 stores will close in fiscal 2025, which began September 1 this year.

“Our fiscal fourth quarter and full year 2024 financial results reflected our disciplined execution of cost management, working capital initiatives and capital expenditure reductions,” said Walgreens CEO Tim Wentworth, who took over from Roz Brewer a year ago.

Walgreens said fourth-quarter sales rose 6% to $37.5 billion, “reflecting sales growth across all segments.” Pharmacy sales in the US in particular increased by 6.5% to $29.5 billion.

“In fiscal year 2025, we are focused on stabilizing the retail pharmacy industry by optimizing our footprint, controlling operating costs, improving cash flow and continuing to address reimbursement models to support dispensing margins and improve patient access for the future,” Wentworth said in a statement. associated corporate profits. “Fiscal year 2025 will be an important rebase year as we continue to develop our strategy to stimulate value creation. This turnaround will take time, but we are confident it will deliver significant financial and consumer benefits in the long term.”

Under the leadership of former CEO Brewer, Walgreens invested more than $6 billion in VillageMD take a controlling interestbut the company has already dramatically scaled back the expansion of physician practices and Village Medical clinics it opened next to Walgreens. The investment in VillageMD has not gone well, and the Walgreens executive said the clinics were not attracting enough patients.

Walgreens said Tuesday that its fiscal 2024 operating loss was $14.1 billion and its net loss for the year was $8.6 billion, or $10 per share. “(The) current period operating loss reflects a $12.4 billion non-cash impairment charge related to VillageMD’s goodwill, which resulted in a $5.8 billion charge attributable to WBA, net of taxes and minority interests,” Walgreens said.