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The Epoch Times
The Epoch Times
1 Jul 2023

NextImg:Walgreens to Close 450 Stores

Pharmacy chain Walgreens Boots Alliance (WBA) has announced plans to shut 450 stores worldwide to reduce costs as the company struggles with poor financial performance.

As part of the cost-cutting measures being implemented at the company, Walgreens is looking to “optimize our locations and opening hours, and expect to close an additional 300 locations in the UK and 150 locations in the U.S,” James Kehoe, Walgreens’ chief financial officer, said during a Q3 earnings call on June 27. Walgreens operates around 9,000 stores in the United States. The company has not revealed the locations of the stores it intends to shut down.

The cost-cutting and store closures come as Walgreens posted lower earnings for the third quarter this year amid a decline in demand for COVID-19 vaccines and lower customer spending. It is also forecasting lower earnings in the coming quarter.

The company recently completed its “organization restructuring,” which led to the elimination of over 500 roles, representing roughly 10 percent of the firm’s corporate and U.S. support office workforce, Kehoe said.

Walgreens plans to save $3.3 billion by the end of this year, and then raise it up by $800 million to $4.1 billion in 2024. The $800 million savings goal is the sixth target increase since the company implemented the “transformational cost management program.”

The firm intends to set up “micro fulfillment centers” as well as increase “tech-enabled centralization of in-store activities,” Kehoe stated.

Walgreens had earlier shut down five stores back in November 2021 due to organized retail theft. In 2020, the company closed a store after losing $1,000 a day to theft.

Walgreens Q3, 2023, net earnings stood at $118 million, down from $289 million in the same quarter a year back. Earnings per share was at $0.14, less than the $0.33 a year back.

Operating loss for the quarter climbed from $0.3 billion to $0.5 billion during this period while adjusted operating income rose by 0.6 percent on a “constant currency basis.”

“Significantly lower demand for COVID-related services, a more cautious and value-driven consumer, and a recently weaker respiratory season created margin pressures in the quarter,” said chief executive Rosalind Brewer, according to a June 27 press release.

“We are raising our cost savings program target to $4.1 billion and taking immediate actions to optimize profitability for our U.S. Healthcare segment. I am confident that our turnaround strategy positions WBA to drive sustainable core growth and deliver long-term shareholder value.”

For the first nine months of fiscal year 2023, Walgreens has registered a net loss of $2.3 billion compared to net earnings of $4.8 billion during the same period a year back.

For Q4, the company expects performance to be “negatively impacted by a higher effective tax rate, shifting U.S. consumer spending with heightened macro pressures, and the impact of a weaker respiratory season for both U.S. Retail Pharmacy and U.S. Healthcare.”

The poor financial performance and future expectations of Walgreens have resulted in Deutsche Bank downgrading the stock. On Wednesday, the bank lowered its advisory for Walgreens stock from buy to hold, reducing its price target from $46 per share to $34.

According to George Hill, an analyst at the bank, the downgrade was influenced by Walgreens lowering its Q4 and fiscal 2024 guidance, he told CNBC.

“There were so many issues on the WBA call that it is difficult to point to one issue as the source of concern,” Hill said. “Perhaps the most striking concern was the reduced guidance for the company’s burgeoning Health segment, which was expected to flip to profitability in F3Q.”

While Walgreens’ earlier guidance projected fiscal year 2023 adjusted EBITDA to be in profit, the company now expects it to register a loss of $340 million to $380 million, he pointed out.

Walgreens was trading at $28.49 as of June 30, down 6.04 percent for the month and registering a decline of 23.39 percent year to date. Over the past five years, the company’s shares have lost more than half their value.