During an interview with the Wall Street Journal, Tim Wentworth, who became CEO last October after a career in managing drug benefits, revealed that Walgreens experienced a 10 percent drop in pre-market trading on June 27 following the announcement of its quarter three earnings, which missed Wall Street's expectations.
According to its Q3 report, Walgreens disclosed earnings per share (EPS) of $0.63, missing the consensus estimate of $0.71. But then, the company's revenue was still slightly higher than anticipated, coming in at $36.4 billion compared to the forecasted $36 billion. As a result, Walgreens adjusted its projected full-year EPS to $2.80 to $2.95, down from the previous estimate of $3.20 to $3.35.
This disappointing earnings report and lowered guidance led Walgreens to be the worst performer in the S&P 500 on June 27, losing nearly $3 billion in market capitalization and down over 53 percent year-to-date.
In response to these headwinds, Wentworth revealed that Walgreens would shutter a quarter of its non-profitable stores, but the exact number of closures is yet to be determined. Walgreens currently has approximately 8,600 locations in the United States.
Wentworth also stated that Walgreens is considering shutting down stores near other better-performing stores to serve consumers more efficiently with fewer locations in specific areas while evaluating stores facing issues such as theft.
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Moreover, Wentworth disclosed that Walgreens will reduce its stake in the primary-care provider VillageMD. Walgreens will also reduce the number of brands it offers to focus on women's health and strengthen its loyalty program. However, it will retain other business units, including the overseas pharmacy chain Boots and Shields Health Solutions, a specialty pharmacy firm.
"We recognize where we are is a turnaround," Wentworth said. "We recognize that we need to be focused on what are the parts of the business that we believe are contributing and have a future, and some of those need to change."
Fortunately, Wentworth reassured employees and the market that the reduction in U.S. retail operations would not result in substantial job losses, as the company intends to reassign staff to other roles within its remaining operations.
"We view this as a reduction in our footprint, not a reduction in our workforce," he said.
Walgreens affected by declining demand for COVID-related goods and services
James Kehoe, the executive vice president and global chief financial officer of Walgreens Boots Alliance, earlier announced a series of cost-cutting measures. These cost-cutting measures include closing 150 Walgreens locations in the U.S. and 300 more in the United Kingdom by the end of August 2024 as the company grapples with declining demand for services related to Wuhan coronavirus (COVID-19) and other economic pressures. (Related: Rite Aid to CLOSE 27 more stores due to ongoing bankruptcy proceedings.)
Plummeting demand for COVID-related goods and services such as vaccinations and testing seriously impacted the company. Former CEO Rosalind Gates Brewer, Wentworth's predecessor, reported an 83 percent decline in vaccinations before stepping down last year.
"We had called out COVID as a wildcard heading into the quarter and have unfortunately seen less patient willingness to vaccinate," she said at the time.
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