Walgreens Shares Surge on Strategic Overhaul and Strong Earnings

Walgreens Boots Alliance witnessed a dramatic stock surge of over 15% following the release of unexpectedly robust quarterly results and the announcement of a profound store optimization strategy. The pharmacy giant revealed plans to shutter approximately 1,200 locations across the United States over the next three years—a decisive move aimed at rapidly enhancing profitability.

Financial Performance Exceeds Projections

The company’s latest earnings report delivered a positive surprise to market observers. Walgreens posted adjusted earnings per share of $0.39, comfortably surpassing the $0.36 consensus estimate among financial analysts. Revenue climbed to $37.55 billion, representing a 6% year-over-year increase and signaling that the company’s intensified cost management initiatives are yielding tangible results.

Despite operating in a challenging market environment, Walgreens achieved significant financial improvements throughout fiscal 2024. The organization reduced expenses by more than $1 billion while simultaneously cutting capital expenditures by over $700 million. Additional working capital measures freed up approximately $600 million in resources, further strengthening the company’s financial position.

Strategic Store Closures Target Underperformance

The cornerstone of Walgreens’ revitalization plan involves substantial footprint reduction. The company will close roughly 1,200 stores over a three-year timeline, with 500 locations scheduled for closure in the upcoming fiscal year alone. With approximately 8,700 U.S. stores currently in operation, this initiative will affect about one-quarter of its physical presence—a stark acknowledgment that 25% of existing locations are currently unprofitable.

Company leadership emphasized that this “footprint optimization program” will deliver immediate benefits to adjusted earnings per share and free cash flow. The strategic move is designed to establish a “healthier store base” while adapting to evolving consumer purchasing patterns and healthcare delivery models.

Should investors sell immediately? Or is it worth buying Walgreens Boots Alliance?

Mixed Financial Picture Emerges

Beneath the encouraging headlines, Walgreens reported a substantial quarterly net loss of $3 billion. This negative result stemmed primarily from specific accounting charges, including a $2.3 billion impact related to tax benefits and goodwill impairments associated with opioid-related legal obligations.

Looking ahead, management provided financial guidance for the coming fiscal year, projecting adjusted earnings between $1.40 and $1.80 per share. Revenue is anticipated to fall in the $147 billion to $151 billion range. While the company expects growth in its U.S. healthcare services and international divisions, it forecasts continued challenges in the domestic retail segment.

Industry-Wide Transformation Underway

Walgreens is not alone in implementing aggressive cost-cutting measures within the pharmacy sector. Competitor CVS Health recently announced plans to eliminate 2,900 positions and close 900 stores, while Rite Aid shuttered more than 520 locations following its bankruptcy filing. The entire retail pharmacy landscape is undergoing fundamental restructuring driven by multiple factors:

• Increasing pressure from Pharmacy Benefit Managers
• Accelerating consumer migration to online pharmacies
• Evolving customer preferences and shopping behaviors
• Persistent margin compression on prescription medications

The 15% stock price surge provided welcome relief to investors following a difficult year that saw Walgreens shares decline by 65%, ranking among the poorest performers in the S&P 500 index. The critical question remains whether these radical restructuring efforts will be sufficient to establish a sustainable recovery trajectory for the pharmacy chain.