Walgreens Experiences Major Stock Surge After Positive Earnings Report and Store Closure Announcement
Walgreens' Unexpectedly Optimistic Forecast
Walgreens' shares in New York experienced their biggest surge in 16 years on Tuesday. This was due to an unexpectedly optimistic forecast for 2025 from the pharmacy chain, which has been struggling in recent years. Alongside this, Walgreens also announced plans to close over a thousand stores nationwide as part of its turnaround plan.
Fourth-Quarter Earnings
The fourth-quarter earnings were 39 cents, surpassing the Bloomberg consensus of 36 cents. This suggests that the pharmacy chain is successfully implementing its aggressive cost-cutting measures as part of an ambitious turnaround plan following years of financial difficulty.
Snapshot of Quarterly Results
The quarterly results showed an adjusted EPS of 39c vs. 67c year on year, with an estimate of 36c. International sales were $5.97 billion, a 3.2% increase from the previous year, beating the estimate of $5.84 billion. Sales were $37.55 billion, a 6% increase year on year, surpassing the estimate of $35.56 billion. The adjusted gross margin was 16.9% vs. 18.6% year on year, with an estimate of 17.6%.
Walgreens' Profit Guidance for 2025
Following these promising fourth quarter results, Walgreens issued profit guidance for 2025 that was in line with the average analysts tracked by Bloomberg. The company's CEO, Tim Wentworth, stated that the turnaround will take time, but he is confident that it will yield significant financial and consumer benefits over the long term.
Store Closures
Walgreens also announced that 14% of its US stores, or around 1,200 locations, will close over the next three years. About 500 of those stores are expected to close in 2025. In June, the company announced that 300 underperforming locations would close as part of the turnaround plan. It also noted that about a quarter of all stores were unprofitable and would undergo "imminent" changes.
Analyst Commentary
Analysts have offered varied commentary on Walgreens' earnings report and turnaround plan. Some have called for more details on the company's FY25 guidance, while others have praised the decision to close underperforming stores. Walgreens' shares jumped as much as 15% in markets, the most in 16 years. However, shares have tumbled 91% since peaking at the $96 handle in August 2015. The latest downward pressure comes from budget-conscious consumers.
Store Closures in Lawless Cities
There is speculation about how many of the Walgreens stores slated to close next are in lawless progressive cities. There have been several reports of brazen theft at Walgreens stores in cities like San Francisco and Portland.
Bottom Line
The recent surge in Walgreens' shares following a better-than-expected earnings report and the announcement of widespread store closures is certainly noteworthy. It shows that the company's aggressive cost-cutting measures and ambitious turnaround plan may be starting to pay off. However, the planned store closures and the ongoing issue of theft in certain cities also highlight the challenges that the company continues to face. What are your thoughts on Walgreens' recent developments? Do you think the company's turnaround plan will be successful? Please share this article with your friends and sign up for the Daily Briefing, which is available every day at 6pm.
