Walgreens on Thursday announced plans to close a "significant" number of underperforming stores across the U.S. due to ongoing challenges with profitability and declining margins.
The store closures are part of the company's multi-year footprint optimization program. While Walgreens didn't specify how many of its more than 8,700 stores will be affected, CEO Tim Wentworth told The Wall Street Journal that a "meaningful percent" of the underperforming locations would shutter.
Walgreens shares tumbled in pre-market trading on Thursday after the company cut its 2024 profit forecast. Over the past year, shares have dropped over 45%.
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"We continue to face a difficult operating environment, including persistent pressures on the U.S. consumer and the impact of recent marketplace dynamics which have eroded pharmacy margins," Wentworth said.
Sales at stores open for at least a year slipped 2.3% compared with the year-ago quarter, which Walgreens blamed on a challenging retail environment. The company also noted that its retail margin was negatively affected by increased promotional activity and higher shrink levels, which is the loss of inventory from things such as theft.
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The company now expects fiscal 2024 full-year adjusted earnings of $2.80 to $2.95 per share, down from its previous estimate of $3.20 to $3.35 a share.
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This change reflects the challenging pharmacy industry trends and a worse-than-expected consumer environment, according to the company.
The company's results and outlook reflect such headwinds, despite solid performance in its international and U.S. health care segments, according to Wentworth.
"Informed by our strategic review, we are focused on improving our core business: retail pharmacy, which is central to the future of healthcare," Wentworth said. "We are addressing critical issues with urgency and working to unlock opportunities for growth."