Walgreens Boots Alliance said on Tuesday it would shut 1,200 stores over the next three years as new CEO Tim Wentworth plots a turnaround at the struggling pharmacy chain operator hit by sluggish consumer spending and low drug reimbursement rates.
The company also narrowly beat Wall Street’s lowered estimates for fourth-quarter adjusted profit, and forecast fiscal-year earnings that were mostly in line with expectations. Its shares jumped 5.4% to $9.50 in premarket trading.
“At first blush, (the forecast) looks better than worst-case scenario,” said Leerink Partners analyst Michael Cherny, adding that Walgreens continues to be buffeted by macro challenges that did not abate in the quarter.
Pharmacy chains are facing multiple challenges as consumers avoid high-priced grocery items and pressures mount on payments they receive from drug middlemen for filling prescriptions.
As a result, Walgreens’ stock is trading near 30-year lows and down 65% this year, making it the worst performer on the S&P 500 index.
CEO Wentworth has unveiled a series of changes since taking on the top job last year, including the removal of multiple mid-level executives and a $1bn cost-cutting program.
“This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term,” said Wentworth in a statement.
The closures were announced in June but the company had not disclosed the number of affected stores at that time. It had over 8,000 stores in the United States as of 31 August last year.