Walgreens on Tuesday reported fiscal fourth-quarter gross sales and adjusted revenue that beat Wall Avenue’s expectations, as the corporate slashes costs in an try and steer itself out of a tough spot.

The retail drugstore chain additionally mentioned it plans to shut roughly 1,200 shops over the following three years, which incorporates 500 in fiscal 2025 alone. The corporate mentioned these closures will likely be “instantly accretive” to its adjusted earnings and free money move.

Walgreens has around 8,700 locations within the U.S., 1 / 4 of which it says are unprofitable. 

These closures will give Walgreens a “more healthy retailer base” and “will allow us to reply to shifts in client habits and shopping for preferences,” the corporate’s CEO Tim Wentworth mentioned throughout an earnings name on Tuesday. He added that Walgreens goals to make use of the vast majority of the workforce affected by the closures, although it’s unclear what number of workers stand to lose their jobs.

The corporate’s shares closed greater than 15% increased on Tuesday.

The outcomes cap a rocky fiscal 2024 for Walgreens, which is grappling with pharmacy reimbursement pressure, softer client spending and challenges associated to its push into primary care, amongst different points. The corporate on Tuesday mentioned it surpassed its goal of reducing $1 billion in prices throughout fiscal 2024, which included shuttering underperforming shops, shedding workers and utilizing synthetic intelligence to make its provide chain extra environment friendly, amongst different efforts. 

Many of the advantages of the fee cuts got here within the firm’s U.S. retail pharmacy section, Walgreens CFO Manmohan Mahajan mentioned in the course of the name.

In June, Walgreens mentioned it intends to shut a “important” variety of its underperforming shops by 2027. Tuesday’s announcement seems to be the corporate’s first actual estimate of what number of places it should shutter.

This is what Walgreens reported for the three-month interval ended Aug. 31 in contrast with what Wall Avenue was anticipating, based mostly on a survey of analysts by LSEG:

• Earnings per share: 39 cents adjusted vs. 36 cents anticipated
• Income: $37.55 billion vs. $35.76 billion anticipated

Walgreens booked gross sales of $37.55 billion for the quarter, up 6% from the identical interval a 12 months in the past. 

The corporate reported a internet lack of $3 billion, or $3.48 per share, for the fiscal fourth quarter. That displays a so-called valuation allowance meant to scale back the corporate’s deferred tax property primarily associated to opioid settlements. 

It compares with a internet lack of $180 million, or 21 cents per share, for the year-earlier interval.

Excluding sure gadgets, adjusted earnings had been 39 cents per share for the quarter. 

The fourth-quarter and full fiscal-year outcomes “mirrored our disciplined execution on price administration, working capital initiatives and capex discount,” Wentworth, who stepped into the function almost a 12 months in the past, mentioned in a launch.

The corporate’s steerage for fiscal 2025 was in keeping with analysts’ expectations. Walgreens expects development in its U.S. health-care and worldwide segments, which will likely be offset by a decline in its retail pharmacy section. 

The corporate is engaged in a “multi-year means of reframing our relationship” with pharmacy profit managers, which negotiate drug rebates on behalf of well being plans and reimburse pharmacies for pharmaceuticals, Wentworth mentioned in the course of the name. Walgreens hopes that may assist enhance margins in its pharmacy enterprise. 

Walgreens anticipates adjusted earnings per share of $1.40 to $1.80 within the coming fiscal 12 months. Analysts undertaking an adjusted revenue of $1.75 per share, in response to LSEG. 

The corporate additionally sees income for the 12 months at $147 billion to $151 billion. Wall Avenue analysts estimate gross sales of $147.3 billion.