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There will be fewer big red “W” logos lit up across the US, since Walgreens plans to shutter 1,200 of its “underperforming” retail drug stores over three years as part of the company’s plan to turn its finances around.
Tim Wentworth, CEO of Walgreens Boots Alliance, said during a Q4 earnings call this week, “we…want to be accessible and convenient but we need to be appropriately sized.” Most of the workers at the affected locations will be offered employment elsewhere in the company, he said.
According to Wentworth, all but 2,000 of its 8,000 retail pharmacies are profitable. The closure of 1,200 stores “will enable us to respond more dynamically to shifts in consumer behavior and buying preferences,” he said. Wentworth added that Walgreens needs to be better at responding “to a changing environment,” something its competitors have done in recent years.
About 500 locations are slated to close in the new fiscal year, CFO Manmohan Mahajan said during the earnings call. The closures will result in a benefit of approximately $100 million in adjusted operating income, and also help fund the company’s plans to invest more into its profitable locations, he added.
Walgreens reported a $3 billion net loss in Q4, compared to a $180 million net loss in Q4 2023. Its adjusted net earnings fell 41% to $340 million.
Piece of the puzzle. The announced store shutterings are just one component of Walgreens’ broader plans to get out of a rough patch.
Walgreens appointed Wentworth as its CEO a year ago. Since then, he has focused on building a new management team, addressing what was within Walgreens’ control to improve its finances, and “undertak[ing] a strategic review of our collection of valuable assets to lay the groundwork for our longer-term turnaround,” he explained during the earnings call.
The company cut costs by more than $1 billion, reduced capital expenditures by $700 million, and saved another $600 million through “working capital initiatives,” according to Wentworth. These short-term actions “contributed to our positive cash flow in the fourth quarter and helped achieve full year cash flow that was also a positive,” and laid the groundwork for longer term goals of “improving our operating cash flow” and further strengthening Walgreens’ balance sheet, he told investors.