Walgreens Boots Alliance shares plunged to the lowest levels in nearly three decades in early Thursday trading, potentially shedding more than $5 billion in value, after slashing its full-year profit forecast and unveiling plans for a “significant multiyear” program of store closures.
Walgreens (WBA) , which is deep in the throes of a major cost-cutting and business turnaround plan under Chief Executive Tim Wentworth, has slashed its regular dividend and reduced global headcount amid stubbornly high inflation and cutbacks in prescription reimbursements.
It’s also closed around 1,000 stores, with nearly 500 U.K. outlets operating under the Boots pharmacy brand axed as of February of this year, and a further 625 locations around the U.S. also shuttered.
The group, which was removed from the Dow Jones Industrial Average earlier this year, said it would likely trim its holding in stand-alone health-care provider Village MD and focus instead on its core retail pharmacy business, which it said is “central to the future of health care.”
Walgreens, like many major U.S. retailers, is suffering huge loses due to organized theft
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That will include a “significant multiyear footprint optimization program” for underperforming U.S. outlets, Walgreens said.
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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,” said CEO Wentworth, who joined the company in October. “Our results and outlook reflect these headwinds, despite solid performance in both our International and U.S. Healthcare segments.”
Walgreens sees higher theft levels
For Walgreens’ fiscal third quarter ended in May, the group posted earnings of 63 cents a share, down 37% from the year-earlier period and shy of Wall Street’s 68- cent consensus forecast.
Group revenue of $36.4 billion topped forecasts, with U.S. retail pharmacy sales up 2.3% to $28.5 billion.
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“Retail sales decreased 4% and comparable retail sales decreased 2.3% compared with the year-ago quarter, reflecting a challenging retail environment and continued channel shift,” Walgreens said. “Retail margin was negatively affected by increased promotional activity and higher shrink levels.”
Walgreens also said full-year profit would likely come in between $2.80 to $2.95 a share, a 40-cent reduction from its March forecast.
Walgreen shares were last marked 24.6% lower in early Thursday trading to change hands at $121.81, the lowest in more than two decades.
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