Retail pharmacy giant Walgreens Boots Alliance (WBA) announced further store closures on Tuesday as it continues to face pressure from the growth of its online prescription delivery platform and continued retail constraints.
Walgreens plans to close 500 stores next year and through the end of the year, bringing the total to 1,200 store closures over the next three years, company executives said during today’s fourth-quarter earnings conference.
The numbers had not been previously released, but Walgreens indicated on its June earnings call that it expects to close up to 2,000 stores. Walgreens stock soared more than 12% in Tuesday trading on the news, indicating the move was welcomed rather than surprising to investors.
The company reported fourth-quarter results in line with expectations, with a loss per share of $3.48, compared to $0.21 in the same quarter in 2024. Meanwhile, sales increased 6% year-on-year to $37.5 billion.
Mary Langowski, the company’s president of U.S. health care, said previous moves focused on short-term shareholder value. The company will focus on growing core businesses such as pharmacies and specialty pharmacy services toward fiscal 2025.
Chief Executive Tim Wentworth said on Tuesday’s earnings call that when he took over the top job last year, he focused on making sure the struggling retailer took cost-cutting measures. It said it has since managed to reduce its net debt by $1.9 billion.
But there is still work to be done. “Building on this momentum is critical as we shift our enforcement focus to stabilizing our core economy,” Wentworth said.
The store closures, or “store footprint optimization” strategy, focuses on what Wentworth calls the company’s “reorientation” as a retail pharmacy. Wentworth said he does not anticipate further reductions in the already stretched workforce.
“We don’t have a lot of store layoffs left…Our stores are tight. That’s not where we’re going to make changes,” he said.
Walgreens pharmacy and closed sign at entrance, Queens, New York (Lindsay Nicholson/UCG/Universal Images Group, via Getty Images) (UCG, via Getty Images)
More closures expected
The move to close stores is just part of the first step in the company’s “rightsizing” process, similar to the VillageMD closure announced earlier this year.
“While the decision to close a store is never an easy one, we are confident in our ability to continue serving our customers,” Wentworth said. Affected employees will be reassigned to other locations. he added.
Walgreens is working with patients to ensure uninterrupted prescription dispensing, including using home delivery if another location is not close enough. However, the company has not included it as part of its future model for the business, indicating it is unclear what the impact will be. But the stores that will close have low volumes and little profit, executives said on a conference call Tuesday.
the story continues
Chief Financial Officer Manmohan Mahajan said, “We are closing stores that have negative cash flow, stores that we own that are underperforming, and stores whose leases are coming to an end in the next few years. We are prioritizing that.”
He added that an additional 800 store closures are being considered, based on the previously disclosed 2,000 store goal.
Wentworth said the retailer’s restructuring is not yet finished. “We are in the early stages of a turnaround that will take time. The fourth quarter of our fiscal year was a key building block in the foundation of this turnaround, and we expect further progress in fiscal year 2025,” Wentworth said.
Fighting PBM reimbursement
In addition to store closures, Wentworth said the company is actively pursuing more equitable reimbursement for prescriptions by pharmacy benefit managers (PBMs). Reimbursement issues have affected pharmacies large and small in recent years.
“We currently have a strong outlook for reimbursements for approximately 80% of our expected scripted volume in fiscal 2025, and we are encouraged by the willingness of some PBM partners to adjust reimbursements to account for current trends. I’m happy,” Wentworth said. .
He said the company is in tough negotiations with PBMs to ensure that all sales to patients, regardless of payment method, are not a loss to the company.
“If it doesn’t make sense, we’re going to get out of that line of business. I said, ‘We’d rather get 5% of executives paying cash than a 100% reimbursement agreement.’ Mr. Wentworth said.
While there are still contracts under negotiation, Wentworth said the current contract situation was “in line with expectations” to ensure improved earnings next year.
Anjalee Khemlani is a senior health reporter at Yahoo Finance, covering all areas of pharma, insurance, care services, digital health, PBM, and health policy and politics. Of course, this also includes GLP-1. Follow Anjalee on most social media platforms @AjKhem.
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