Walgreens Boots Alliance Inc (NASDAQ:WBA, ETR:W8A) was one of the top risers on the S&P 500, jumping 10.4% as it announced plans to close most of its underperforming stores.
Investors were impressed by news that the drug store chain plans to close around 1,200 of its 8,700 US drugstores over the next three years, saying a quarter of its outlets are unprofitable.
The restructuring of its store portfolio, including 500 closures in fiscal 2025, will be "immediately accretive" to its earnings and free cash flow.
CEO Tim Wentworth said this will give Walgreens a "healthier store base" and "will enable us to respond to shifts in consumer behavior and buying preferences,” the company’s said during an earnings call on Tuesday
Fourth-quarter earnings of 39 cents for the quarter ending 31 August was better than 36 cents expected by Wall Street.
A net loss of $3 billion was recorded for the fourth quarter, up from $180 million a year ago, primarily driven by a higher operating loss, a $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.
For the whole year, sales were $147.7 billion, up 6.2% from last year as sales grew across all segments.
Operating losses doubled to $14.1 billion, reflecting a $12.4 billion non-cash impairment charge related to VillageMD goodwill, and impairment charges related to certain long-lived assets in the US retail pharmacy segment and CareCentrix goodwill. In the prior year, a $6.8 billion pre-tax charge was taken for opioid-related claims and litigation and a $431 million non-cash impairment of pharmacy license intangible assets in Boots UK.
Adjusted operating income was $2.6 billion this year, a decrease of 32.6% which it said reflected the challenging US 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 US.