Walgreens is finalizing a plan to turn around its business that could result in hundreds more stores closing over the next three years.
CEO Tim Wentworth told analysts Thursday morning that “changes are imminent” for about 25% of the company’s stores, which he said were underperforming. The pharmacy chain currently operates more than 8,600 in the United States.
Wentworth said the company’s plan could include closing a “significant portion” of those 2,100 stores.
“We are at a point where the current pharmaceutical model is unsustainable and the challenges of our operating environment require us to approach the market differently,” he said.
Walgreens shares fell early Thursday after the drugstore chain also said it missed earnings expectations for its third quarter and cut its annual forecast.
Walgreens and its major competitors like CVS and Rite Aid — which are currently undergoing bankruptcy reorganization — have already closed hundreds of stores in recent years. Companies have faced challenges such as years of tight prescription reimbursement and increasing costs for operating their sites.
Additionally, analysts say they have also been hurt by growing competition from Walmart, Amazon and other discount retailers on sales of products sold outside of their pharmacies. Consumers also tend to be more price conscious when inflation rises.
“Our customers have become increasingly selective and price sensitive in their purchases,” said Wentworth, who joined the company last fall and conducted a review of its operations.
Walgreens also closed the VillageMD primary care clinics it had set up next to its stores in an effort to increase its presence as a health care provider.
Walgreens Boots Alliance Inc. operates approximately 12,500 pharmacies worldwide, including more than 8,600 in the United States.
The company said it earned $344 million in its fiscal third quarter, with adjusted results totaling 63 cents per share. Revenue rose nearly 3% to $36.35 billion.
Analysts had expected earnings of 68 cents per share on revenue of $35.9 billion, according to FactSet.
Walgreens also said it now expects its adjusted profit to be between $2.80 and $2.95 for its fiscal year, which ends in August. That’s down from a forecast of $3.20 to $3.35 per share that it cut in March.
Analysts expect a return of $3.20 per share.
This forecast drop did not “shock us too much, as the company is now entering the next stage of its turnaround,” Michael Cherny, an analyst at Leerink Partners, said in a research note.
But the overall results surprised investors. Shares of the Deerfield, Illinois, company fell 21% to $12.38 in premarket trading.
