Walgreens maps out $1 billion in cost cuts as profit forecast underwhelms

(Reuters) -Walgreens Boots Alliance said on Thursday that it expected to cut at least $1 billion in costs in 2024 as part of its ongoing efforts, which include shutting unprofitable stores, after the pharmacy chain operator forecast financial year 2024 profit below Wall Street’s expectations.

Shares of the company rose 5% in early trading, paring earlier premarket losses after it highlighted more cost-cutting measures, like using artificial intelligence to make its supply chain more efficient.

It is also lowering its capital expenditure by about $600 million. Its shares have fallen nearly 40% so far this year.

Walgreens has been contending with a steep drop in sales of COVID-19 products, persistently weak prescription drug demand, reported walkouts by its store staff and weak sales of its consumer health products due to high inflation.

Its adjusted profit of 67 cents per share in the fourth quarter also missed the LSEG estimate of 69 cents per share.

“Our performance this year has not reflected WBA’s strong assets, brand legacy, or our commitment to our customers and patients,” Interim CEO Ginger Graham said in a statement.

The company recorded a $6.8 billion pre-tax charge for opioid-related claims and litigation during the last financial year.

Walgreens had said in June it would close its stores at 150 locations in the United States. It also named Tim Wentworth, a former Cigna executive, as permanent CEO on Tuesday.

The second-largest U.S. pharmacy chain operator, whose financial year ends in August, forecast an annual adjusted profit of $3.20 to $3.50 per share, compared to analysts’ average estimate of $3.72 per share, according to LSEG data.

In the fourth quarter, the company reported a 4.3% fall in U.S. retail sales and a 0.5% decline in total prescriptions filled, including vaccinations.

“Walgreens has lost customer share in areas like beauty and personal care. Some of this is because prices remain too high and are uncompetitive – something more and more shoppers won’t tolerate in the current environment,” GlobalData Managing Director Neil Saunders said.

(Reporting by Khushi Mandowara and Leroy Leo in Bengaluru; Editing by Pooja Desai)