- Walgreens is set to close 1,200 stores in the US over the next three years.
- The closures follow a June announcement to shut 25% of its US locations.
- Walgreens reported a $3 billion loss in its fourth-quarter fiscal 2024 results.
The US pharmacy giant Walgreens announced Tuesday that it will close 1,200 stores across the US over the next three years as part of its turnaround effort. Five hundred locations are set to close next year.
"We also want to be accessible and convenient, but we need to be appropriately sized," Walgreens Boots Alliance CEO Tim Wentworth said during the company's fourth-quarter earnings call on Tuesday.
Shares of WBA stock jumped as much as 18% after the news before trimming gains to about 12% as of 1 p.m. in New York.
The company said earlier this year that it planned to close a "significant" number of its roughly 8,700 locations in the US.
Wentworth told analysts on the firm's quarterly earnings call in June that "changes are imminent" for the 25% of Walgreens stores that were underperforming.
The company's chief financial officer, Manmohan Mahajan, explained on the earnings call that the closures were targeted toward locations with negative cash flow, underperforming locations where Walgreens owned the real estate, and others where leases were expiring.
"This indicates that there are another 800 stores for which we're focused on improving their operating performance and cash flows," Mahajan added. "However, as has always been the case, we will continuously evaluate this group and all our stores to ensure we ultimately operate with the best possible footprint."
The news of 1,200 closures came as the firm announced its fourth-quarter and full-year results for fiscal 2024, reporting a $3 billion loss during the quarter.
Along with closing unprofitable stores, the pharmacy chain is also dialing back investments in its primary care clinics — VillageMD — as part of its plan to cut costs.
According to a Securities and Exchange Commission filing from August, Walgreens has previously considered selling all or part of its VillageMD subsidiary.
"From our data, high prices, poor assortments, a lack of customer service, and terrible store environments all share some of the blame for this ongoing deterioration. In other words, Walgreens is simply not getting the basics of retail right," the GlobalData Retail analyst Neil Saunders said in a note on the earnings.
"While it is understandable that Walgreens wants to close underperforming stores, it desperately needs to have a plan to protect its remaining estate," he added.
Walgreens is among several US chains closing stores. Analysts at UBS previously estimated that US retail closures alone could reach 45,000 over the next five years, led by smaller stores going out of business.
