Walgreens Boots Alliance (WBA) announced more store closures on Tuesday, as the pharmacy giant remains under pressure from the growth of online prescription delivery platforms and continued retail restrictions.
Walgreens will close 500 stores next year by the end of the year and close a total of 1,200 stores over the next three years, company executives said today during its fourth-quarter earnings call.
The number had not previously been disclosed, but Walgreens indicated during an earnings call in June that there would be up to 2,000 store closures. Walgreens shares rose more than 12% in trading Tuesday on the news — the signal from the move was not a surprise and even welcome to investors.
The company reported fourth-quarter earnings in line with expectations, with a loss per share of $3.48 compared to $0.21 in the same quarter in 2024. Revenues, meanwhile, rose 6% year-over-year to $37, 5 billion.
Mary Langowski, president of U.S. healthcare at the company, said the steps taken so far have focused on near-term shareholder value. For fiscal year 2025, the company will focus on growing its core businesses, including pharmacies and specialty pharmacy services.
CEO Tim Wentworth said on Tuesday’s earnings call that when he took the top spot last year, he was focused on ensuring the struggling retailer takes steps to reduce costs and has since successfully reduced net debt by $1.9 billion reduced.
But there is still more work to be done. “Building on this momentum is critical as we turn our execution focus to stabilizing our core economies,” Wentworth said.
The store closures, or “footprint optimization” strategy, are aimed at what Wentworth has called “reorienting” the company as a retail pharmacy. Wentworth said he does not expect further cuts to the 300,000-employee workforce, which is already under pressure.
“There’s not a lot of staff loss in the stores anymore… our stores are tight. That’s not where you’re going to see us make a difference,” he said.
More closures are expected
The move to close stores is just part of the first phase, along with the VillageMD closures announced earlier this year, of a “right-sizing” process for the company.
“While the decision to close the store is never an easy one, we are confident we can continue to serve our customers,” Wentworth said, adding that affected employees would be transferred to other locations.
Walgreens is working with patients to ensure prescription filling is not interrupted, including home delivery if they are not close enough to another location. But the company is not including this as part of its future modeling for the business, indicating it is unsure what the impact will be. But the stores that are closing are low volume and make very little money, executives said on the call Tuesday.
“We are prioritizing closing locations with negative cash flow, underperforming stores whose locations we own, and stores whose leases expire in the coming years,” said CFO Manmohan Mahajan.
He added that based on the previously announced target of 2,000 stores, another 800 stores are being evaluated for closure.
Wentworth said the retailer’s shake-up is not over yet. “We are in the early stages of a turnaround that will take time. The fiscal fourth quarter was a key building block in the foundation of this turnaround, and we expect further progress in fiscal 2025,” Wentworth said.
Fight against PPE reimbursements
In addition to the store closures, Wentworth also said the company is aggressively pursuing fairer reimbursement for prescriptions by pharmacy benefit managers (PBMs). The reimbursement issue has affected pharmacies large and small in recent years.
“Today we have a high level of insight into reimbursement for approximately 80% of expected script volume in fiscal year 2025. We are pleased with the willingness some of our PBM partners have shown to consider current trends and to adjust the compensation,” Wentworth said. .
He said the company is engaged in tough negotiations with PBMs and has ensured that all sales to patients — regardless of how they pay — are not a loss to the company.
“We are willing to part with an industry if it doesn’t make sense. I have said that… we would rather have 5% of the cash-paying framework than 100% of a reimbursed contract,” Wentworth said.
There are more contracts under negotiation, but Wentworth said the current state of the contracts is “exactly where I would expect us to be” to ensure stronger revenues for the coming fiscal year.
Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharmaceutical, insurance, healthcare services, digital health, PBMs, and health policy and politics. This of course also applies to GLP-1s. Follow Anjalee on most social media platforms @AnjKhem.
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