Walgreens has announced plans to close approximately 1,200 locations over the next three years in an effort to revitalize its struggling U.S. business. The company disclosed that around 500 store closures will take place in the current fiscal year, with expectations that this move will have an immediate positive impact on adjusted earnings and free cash flow.
Leaders at Walgreens Boots Alliance Inc. revealed in late June that they were in the final stages of developing a turnaround strategy for its U.S. operations, which could involve shutting down hundreds of underperforming stores. Like many of its competitors, Walgreens has been grappling with challenges such as tight reimbursement rates for prescriptions and escalating operational costs.
The company had previously embarked on an ambitious plan to integrate primary care clinics alongside some of its stores, but has since decided to scale back on this initiative. In August, Walgreens announced a review of its U.S. healthcare business, including the potential sale of all or part of its VillageMD clinic business. This shift in strategy comes less than two years after the company had committed significant investments towards expanding this segment.
At the start of 2024, Walgreens reduced its dividend payouts to shareholders in order to bolster its cash reserves for future growth opportunities. Subsequently, the drugstore chain revised its fiscal 2024 forecast downwards in June. Despite these challenges, Walgreens' shares experienced a notable surge in early trading on Tuesday following the announcement of the store closures.
Having witnessed a substantial decline in value throughout the year, with shares dropping to $9 as of the previous day's close, Walgreens' stock saw a more than 5% increase prior to the market opening on Tuesday in response to the cost-cutting measures.
