Walgreens to close 1,200 stores over next three years

In releasing its financial results for the fiscal year and fourth quarter, Walgreens Boots Alliance announced that is will close about 1,200 stores over the next three years, including approximately 500 closures in fiscal 2025, which will be immediately accretive to adjusted EPS and free cash flow.“Our financial results in the fiscal fourth quarter and full year 2024 reflected our disciplined execution on cost management, working capital initiatives and capex reduction. In fiscal 2025, we are focusing on stabilizing the retail pharmacy by optimizing our footprint, controlling operating costs, improving cash flow, and continuing to address reimbursement models to support dispensing margins and preserve patient access for the future,” said Tim Wentworth, CEO of Walgreens Boots Alliance. “Fiscal 2025 will be an important rebasing year as we advance our strategy to drive value creation. This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term.”WBA fourth quarter sales increased 6% from the year-ago quarter to US$37.5 billion, an increase of 6.1% on a constant currency basis, reflecting sales growth across all segments.Fourth quarter operating loss was US$978 million, an increase of 117.1% compared to the year-ago quarter. The increase in operating loss reflects a non-cash goodwill impairment charge related to CareCentrix. Adjusted operating income was US$424 million, a decrease of 37.7% on a constant currency basis, reflecting softer U.S. retail and pharmacy performance, lapping the reversal of incentive accruals and prior year sale-leaseback gains, partly offset by cost savings initiatives and improved profitability in the U.S. Healthcare segment, WBA said. Net loss in the fourth quarter was US$3 billion compared to a net loss of US$180 million in the year-ago quarter, primarily driven by a higher operating loss, a US$2.3 billion non-cash charge for valuation allowance on deferred tax assets primarily related to opioid liabilities recognized in prior periods, and a non-cash impairment charge related to equity investment in China. Adjusted net earnings decreased 41% to US$340 million, down 40.8% on a constant currency basis, reflecting lower adjusted operating income, the retailer said. Loss per share was US$3.48, compared to a loss per share of 21 cents in the year-ago quarter. Adjusted EPS decreased 41% to 39 cents, reflecting a decrease of 40.8% on a constant currency basis, WBA said.Net cash provided by operating activities was US$1.3 billion in the fourth quarter and free cash flow was US$1.1 billion, a US$537 million increase compared with the year-ago quarter, each driven primarily by working capital initiatives and lower legal payments in the current period. Free cash flow also benefited from a US$239 million decrease in capital expenditures.Sales in fiscal 2024 were US$147.7 billion, an increase of 6.2% from the year-ago period, and an increase of 5.7% on a constant currency basis, reflecting sales growth across all segments.Operating loss in fiscal 2024 was US$14.1 billion, an increase of 104.5% compared to the year-ago period. Operating loss in the current period reflects a US$12.4 billion non-cash impairment charge related to VillageMD goodwill, which resulted in a US$5.8 billion charge attributable to WBA, net of tax and non-controlling interest. Operating loss in the current period also reflects non-cash impairments charges related to certain long-lived assets in the U.S. Retail Pharmacy segment and CareCentrix goodwill. Prior year operating loss reflects a US$6.8 billion pre-tax charge for opioid-related claims and litigation and a US$431 million non-cash impairment of pharmacy license intangible assets in Boots UK. Adjusted operating income was US$2.6 billion, a decrease of 32.6% on a constant currency basis, reflecting a challenging U.S. retail environment, net reimbursement pressure, lower sale-leaseback gains and lapping the reversal of incentive accruals in the prior year, partly offset by cost savings and improved profitability in the U.S. Healthcare segment.Net loss in fiscal 2024 was US$8.6 billion, an increase of 180.4% compared to the year-ago period, primarily driven by a higher operating loss, a US$2.2 billion non-cash charge for valuation allowance on certain deferred tax assets and a US$717 million after-tax charge for fair value adjustments on variable prepaid forward derivatives related to the monetization of Cencora shares. Adjusted net earnings were US$2.5 billion, a decrease of 27.9% on a constant currency basis, primarily driven by lower adjusted operating income, partly offset by lower interest expense and a lower adjusted effective tax rate due to the recognition of deferred tax assets in foreign jurisdictions in the second quarter, WBA said.Loss per share for fiscal 2024 was US$10.01, an increase of 180.4% compared to the year-ago period. Adjusted EPS was US$2.88, a decrease of 27.6%, reflecting a decrease of 27.9% on a constant currency basis.Net cash provided by operating activities was US$1 billion in fiscal 2024. Free cash flow was US$23 million, a decrease of US$642 million from fiscal 2023, with each driven by lower earnings, higher payments related to legal matters and phasing of working capital. Free cash flow benefited from a US$736 million decrease in capital expenditures.The U.S. retail pharmacy segment:The U.S. retail pharmacy segment had fourth quarter sales of US$29.5 billion, an increase of 6.5% from the year-ago quarter. Comparable sales increased 8.3% from the year-ago quarter.Pharmacy sales increased 9.6% and comparable pharmacy sales increased 11.7% in the fourth quarter, each driven by higher brand inflation and mix impacts. Comparable prescriptions, adjusted to 30-day equivalents increased 2.5% and comparable prescriptions excluding immunizations increased 2.6% compared with the year-ago quarter. Total prescriptions filled in the quarter, including immunizations, adjusted to 30-day equivalents, increased 1.7% to 302 million. Pharmacy margin was negatively impacted by net reimbursement pressure, brand inflation and mix impacts.Retail sales decreased 3.5% and comparable retail sales decreased 1.7% compared with the year-ago quarter, reflecting a challenging retail environment and continued channel shift. Retail margin was positively impacted by category mix and higher owned brand penetration, partly offset by elevated shrink levels.Adjusted operating income decreased 60.4% to US$220 million, reflecting net reimbursement pressure, a US$123 million headwind from a prior year incentive accrual release, a US$74 million headwind from lower sale-leaseback gains and a challenging retail environment, partly offset by cost savings initiatives.International segment:The International segment had fourth quarter sales of US$6 billion, an increase of 3.2% from the year-ago quarter. Sales increased 3.7% on a constant currency basis, with the Germany wholesale business sales growing 8.2% and Boots UK sales growing 2.3%.Boots UK comparable pharmacy sales increased 10% compared with the year-ago quarter. Comparable retail sales increased 6.2% compared to the year-ago quarter, with growth across all categories. Boots.com continued to perform strongly with sales growing 19%, representing 15% of Boots total retail sales.Adjusted operating income decreased 10.9% to US$231 million, a decrease of 10.6% on a constant currency basis, mainly due to lapping real estate gains in the year-ago period.U.S. Healthcare segment:The U.S. Healthcare segment had fourth quarter sales of US$2.1 billion, an increase of 7.1% compared to the year-ago quarter. VillageMD sales increased 7.2%, reflecting additional risk lives and fee-for-service revenue. Shields grew 27.8%, driven by growth within existing partnerships.The company reported operating loss in the quarter was US$526 million compared to US$294 million in the prior year period, reflecting the US$332 million non-cash goodwill impairment charge related to CareCentrix. Adjusted operating income, which excludes certain costs related to stock compensation expense and amortization of acquired intangible assets, was US$17 million compared to an adjusted operating loss of US$83 million in the year-ago quarter. Adjusted EBITDA2 of US$65 million improved by US$94 million versus the prior year quarter, driven by cost discipline at VillageMD and growth from Shields.For fiscal 2025, Walgreens Boots Alliance expects adjusted EPS of US$1.40 to US$1.80 with growth in U.S. Healthcare and International more than offset by decline in U.S. Retail Pharmacy, a higher adjusted effective tax rate, and lower contributions from sale-leaseback and Cencora earnings.This article was first published in our U.S. sister publication Drug Store News.

Walgreens to close 1,200 stores over next three years

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