Walgreens to Shut Down 1,200 Stores by 2027 as Part of $1 Billion Cost-Cutting Strategy, Despite Beating Q4 Earnings Estimates

About 25% of US Walgreen stores were found unprofitable.

By Thea Felicity

Oct 15 2024, 09:58 AM EDT

Walgreen's Plans To Close A Number Of Its Stores Across — NEW YORK, NEW YORK - JUNE 27: A Walgreens store stands on June 27, 2024 in the Brooklyn borough of New York City. Walgreens has announced that it will be closing a "significant" number of underperforming stores in the United States. Spencer Platt/Getty Images

Walgreens announced a major decision, which will likely stores it built in the US.

For now, the good news is that the company reported sales and profits that beat expectations for the quarter. This ultimately increased their shares to 6% in premarket trading. However, there will be tough decisions to make ahead to prioritize revenues.

According to CNBC, Walgreens intends to remove thousands of its stores for the next three years in the US. This is part of their wide strategies to reduce operational costs after seeing the results of their same strategy in this fiscal year. Approximately next year, there will be 500 closures to increase earnings and cash flow after a realization from data that showed how 25% of its 8,700 US locations are no longer earning well.

By 2027, there will be over 1,200 Walgreens stores closed down.

Walgreens Q4 Results

Walgreens beating Q4 expectations was deemed impressive by investors despite facing Investors are especially impressed by the company's capacity to beat previously disappointing Q4 and turn it around into a success this fiscal year, as shown in their shares increase. Last year and in the first half of 2024, pharmacy reimbursement issues were a problem. Considering the inflation and increased consumer price index, reduced consumer spending was also recorded as well as its disappointing expansion into primary care.

The August 31 quarter saw Walgreens' reported adjusted earnings of $0.39 per share, which is much better than the $0.36 analysts expected. The company also recorded $37 billion in revenue, exceeding projections of $35.75

In the US, Walgreens' retail pharmacy segment generated $29.47 billion in fourth-quarter sales, a 6.5 increase from last year, mainly due to higher brand medication prices. The company reportedly filled 301 million prescriptions.

Walgreens to Shut Down Underperforming Stores

However, part of this result is their cost-cutting efforts, which saved them over $1 billion. Besides closing underperforming stores, Walgreens also laid off employees after using AI to streamline its supply chain.

In 2023, with some underperforming stores still up, Walgreens Bots Alliance reported a net loss of $180 million. CEO Tim Wentworth emphasized last year that they will be focusing on cost management and reducing capital expenditures instead. Looking ahead to fiscal 2025, Walgreens expects growth in its US healthcare and international segments. However, it anticipates a decline in its retail pharmacy division, similar to its competitor, Walmart's healthcare sector, per VCPost.

In the same CNBC report, international sales for Walgreens sales rose 3.2% or $5.9 billion, with its UK drugstore chain, Boots, seeing a 2.3% increase. With this, for the next fiscal year, the forecasted revenue is between $147 billion and $151 billion, above Wall Street's $147.3 billion estimate.