Today could have been a calamity for chain pharmacy retailer Walgreens Boots Alliance (WBA) after revealing how many of its locations are profitable. But its solid earnings results and plan to shutter many locations sent shares spiking, as Walgreens stock was up over 12% in Tuesday afternoon’s trading.
Earnings for Walgreens were good, as it posted earnings per share of $0.39 against the analyst forecast of $0.36. In addition, revenue came in at $37.55 billion against expectations of $35.76 billion. Walgreens revealed that it managed to cut $1 billion in costs in its Fiscal Year 2024, which explains why earnings beat projections.
Then, the company lowered the boom, announcing plans to close about 1,200 stores throughout its network. The plan is to start with 500 closures in 2025 and then close the remaining 700 in the years to follow. With around 8,700 total locations throughout the United States, closing 1,200 is a fairly large percentage but not a complete loss.
Then We Found Out Why
That was when things actually got worse for Walgreens and its shareholders. A report from the New York Post detailed that one in four Walgreens locations are unprofitable. Which locations will be closed is, as yet, unknown, as is just how many jobs will be lost as a result of the closures.
And what proves more interesting about this development is doing the math around it. There are 8,700 Walgreens locations in the United States. One in four are unprofitable, which works out to around 2,175 locations. But only just over half this number, 1,200 locations are set to be closed. That should make just about anyone wonder why will Walgreens keep open unprofitable locations?
Perhaps these are in certain areas that would be “pharmacy deserts” otherwise – areas with little access to pharmacies. There may be political motives. But it is clear that Walgreens means to recover from its downturn.
Is Walgreens a Good Stock to Buy Right Now?
Turning to Wall Street, analysts have a Hold consensus rating on WBA stock based on two Buys, seven Holds, and three Sells assigned in the past three months, as indicated by the graphic below. After a 53.09% loss in its share price over the past year, the average WBA price target of $13.67 per share implies 34.81% upside potential.
