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Walgreens plans to close 1,200 stores; its stock price sees a double-digit jump
Walgreens plans to close about 1,200 stores over the next three years in an effort to improve earnings and increase cash flow, the struggling company announced Tuesday.
The downsizing plan by Walgreens Boots Alliance will target 500 stores during the current fiscal year, which began on Sept. 1, and comes months after Chief Executive Tim Wentworth acknowledged that about a quarter of the company’s 8,600 U.S. stores were underperforming.
The company did not specify which stores will close but said it will prioritize underperforming locations owned by the company or at which the lease is expiring. Only stores in the U.S. will be affected. Walgreens Boots Alliance also owns the Boots pharmacy chain in the United Kingdom.
Wentworth told analysts Tuesday that about 6,000 Walgreens locations remain profitable, according to the Associated Press. The company operates more than 580 stores in California, second only to Florida. The closures announced Tuesday include 300 already approved under a previous cost-cutting plan.
Walgreens is not alone in its woes — competitors Rite Aid and CVS have also been forced to reconsider their footprints and close locations amid challenging times for the industry. Rite Aid has closed more than 200 stores since filing for Chapter 11 bankruptcy in 2023.
Read more: ‘My kids go to Costco now,’ and other reasons Rite Aid, Walgreens and CVS are hurting
On the retail side, chain pharmacies are facing heavy competition from giants such as Amazon and Walmart, while a drop in consumer spending and an increase in theft have continued to eat into profits, analysts said. On the pharmaceutical side, they’re seeing tighter margins because of lower reimbursement rates for the drugs they sell to customers.
Much of the pharmacy pinch is rooted in the companies’ dependence on intermediaries called pharmacy benefit managers, or PBMs, that have significant control over how much pharmacies get reimbursed for the drugs they sell to customers.
Two of the largest benefit management companies, OptumRX and Caremark, are owned by insurance companies that have been looking to cut costs by pushing down reimbursement rates, which has punished the pharmacies’ bottom lines.
Chain pharmacies are also operating in an overcrowded environment, said Raymond James healthcare analyst John Ransom. Partly because of a real estate binge in the 1990s, urban communities are dotted with an excess of pharmacies, he said.
“Like most retailers, we have been facing a challenging operating environment,” Walgreens external communications manager Samantha Stansberry said in August. “These factors have resulted in a growing number of store closures across the country as we invest in our other locations to deliver a consistent customer experience.”
Read more: Walgreens woes continue with earnings miss, guidance cut and plans to shutter more stores
The plan to close stores was announced as part of the company’s release of its fourth-quarter and end-of-year financial reports, which underscored its dire straits. For fiscal year 2024, which ended Aug. 31, Walgreens posted a net loss of $8.6 billion, up 180% from the previous year. Total revenue for the company rose about 6% for the year to $147.7 billion.
Investors reacted positively to Walgreens’ cost-saving strategy, driving up shares in the company nearly 16% on Tuesday to $10.42. The rise, however, still left the stock down more than 61% so far this year.
“Fiscal 2025 will be an important rebasing year as we advance our strategy to drive value creation,” Wentworth said in a news release detailing fourth-quarter and full-year financial results. “This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term.”
This story originally appeared in Los Angeles Times.
Sales of existing homes fell in September as house hunters remained on the fence about buying a home despite mortgage rates easing during the month.
Existing home sales slipped 1.0% from August’s tally to a seasonally adjusted annual rate of 3.84 million, the National Association of Realtors said Wednesday. That marked the lowest rate since October 2010. Economists polled by Bloomberg expected a pace of 3.88 million in September.
On a yearly basis, sales of previously owned homes were 3.5% lower in September. The median home price rose 3.0% from last September to $404,500, marking the 15th consecutive month of annual price increases.
“Home sales have been essentially stuck at around a 4 million-unit pace for the past 12 months,” NAR chief economist Lawrence Yun said in a press release.
There have been significant challenges that have weighed on sales activity, including a lack of inventory, escalating prices, and elevated mortgage rates. Last month, however, those factors turned around.
The Federal Reserve cut its benchmark rate by half a percentage point in September. While the central bank doesn’t set mortgage rates, its actions influence their direction of movement.
Mortgage rates hit the lowest level since February 2023 ahead of the Fed decision to ease, while listing inventory picked up.
But overall, that hasn’t been enough to entice buyers.
“Some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election,” Yun said.
Tesla (TSLA) reported mixed third quarter results after the bell on Wednesday, but the stock jumped in after-hours trading as investors cheered the earnings beat, higher gross margins, and news that Tesla’s cheaper EV is on track for production next year.
For the quarter, Tesla reported revenue of $25.18 billion vs. $25.4 billion per Bloomberg consensus, higher than the $25.05 billion it reported in Q2 and also topping the $23.40 billion Tesla reported a year ago. Tesla posted adjusted EPS of $0.72 vs $0.60 expected, on adjusted net income of $2.5 billion and free cash flow of $2.9 billion.
The closely watched gross margin figure came in at 19.8%, much higher than the 16.8% expected.
Tesla shares were up nearly 8% in after hours trade.
“We delivered strong results in Q3 with growth in vehicle deliveries both sequentially and year-on-year, resulting in record third-quarter volumes,” the company said in its earnings deck. “Preparations remain underway for our offering of new vehicles — including more affordable models — which we will begin launching in the first half of 2025.”
Earlier this month, Tesla (TSLA) announced third quarter deliveries that slightly missed expectations, sending the stock lower.
Tesla said it delivered 462,890 vehicles in Q3, up 6.4% quarter over quarter, to mark the first quarter of delivery growth this year. The numbers also came in ahead of the 435,059 EVs the company delivered in the year-ago period. But Wall Street had expected Tesla to deliver closer to 463,897, according to Bloomberg.
“Refreshed Model 3 ramp continued successfully in Q3 with higher total production and lower cost of goods sold quarter-over-quarter. Cybertruck production increased sequentially and achieved a positive gross margin for the first time,” Tesla said in its report.
Tesla said it expects vehicle deliveries to achieve “slight growth” in 2024.
Ahead of Tesla’s Q3 disclosure, shares were down approximately 11% since Tesla revealed its robotaxi, dubbed the Cybercab, at its showy “We, Robot” event from the Warner Bros. studio lot in Burbank, Calif., on Oct. 10.
The debut and release of a cheaper EV is what many analysts and industry watchers believe will spur the next leg higher of EV sales, as even CEO Elon Musk has said before. During its Q2 report, Tesla and Musk said the company remains on track for the production of new vehicles, likely including a cheaper EV, in the first half of next year.
Investors and analysts were left wanting more details from Tesla’s “We, Robot” event on the Cybercab itself and detailed testing plans, along with questions about the development of Tesla’s sub-$30,000 EV, dubbed the Model 2.
Transak disclosed a data breach affecting over 92,000 users after a phishing attack compromised an employee’s laptop.
CryptoCurrency
The Dow plummets more than 600 points and is on track for its worst day in more than a month
The Dow Jones Industrial Average and other major indexes suffered a steep decline Wednesday afternoon as the yield on the benchmark 10-year U.S. Treasury note continued its upward climb, reaching 4.23%—a level not seen since July.
In the afternoon, the Dow dropped 631 points, or 1.4%, heading for its worst day in over a month. Meanwhile, the tech-heavy Nasdaq and the S&P 500 declined by 2.2% and 1.4%, respectively. However, there was some relief for investors as oil prices eased, with West Texas Intermediate (WTI) futures trading around $70.65 per barrel.
The Federal Reserve’s Beige Book, released in the afternoon, reported that economic activity remained largely unchanged across the 12 Federal Reserve Districts, with the Southeast significantly impacted by a harsh storm season.
On Wednesday, all eyes are on Tesla (TSLA) as the company prepares to release its latest earnings report. Analysts expect earnings per share to be 60 cents, down from 66 cents a year ago but an improvement from 52 cents in the previous quarter, according to FactSet estimates. Revenue is projected to hit $25.4 billion, compared to $23.3 billion in the third quarter of 2023 and $25.5 billion in the preceding quarter.
Apart from Tesla, investors are closely monitoring earnings reports from other major corporations, including AT&T (T), Boeing (BA), and Coca-Cola (KO).
McDonald’s stock plunges over 5%
McDonald’s (MCD) shares took a sharp hit, falling over 5% after the Centers for Disease Control and Prevention (CDC) linked the chain’s Quarter Pounder burgers to an E. coli outbreak. The outbreak has led to 10 hospitalizations and one death, driving a significant decline in McDonald’s stock during the afternoon trading session.
As of now, 49 cases have been reported across 10 states between Sept. 27 and Oct. 11, with a majority of illnesses occurring in Colorado, Nebraska, Utah, and Wyoming. The CDC noted that most of those affected had eaten a Quarter Pounder. Investigators are working swiftly to identify the contaminated ingredient.
Spirit Airlines stock soars 30%
After a failed attempt at merging with JetBlue (JBLU-0.80%), ultra-low-cost carrier Spirit Airlines (SAVE+28.01%) is reportedly turning back to a familiar partner. The Wall Street Journal (NWSA-0.34%), citing people familiar with the matter, reports that Spirit and Frontier Airlines (ULCC+3.05%) are in early talks over a potential merger. The news sent Spirit’s stock soaring nearly 30% on Wednesday.
–Francisco Velasquez and Rocio Fabbro contributed to the article
The semi-autonomous region of Tanzania is taking advantage of a sandbox regulatory framework adopted in July.
Bitcoin’s correction ignited selling in altcoins, which are slipping below critical support levels.
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