Boots Alliance (NASDAQ:WBA) has lowered its profit forecast for fiscal 2024 and announced plans to close additional underperforming U.S. stores, citing weak consumer spending as the reason. This announcement led to a 20% drop in the company’s shares on Thursday.

The pharmacy chain did not disclose the specific number of stores to be closed but stated that it is finalizing a “significant multi-year” program targeting about a quarter of its more than 8,700 U.S. locations. CEO Tim Wentworth, who joined the company last October, has launched a comprehensive restructuring initiative at Walgreens, including store closures, eliminating several mid-level executive roles, and implementing a $1 billion cost-cutting strategy.

Walgreens Halves Dividend Amid Reduced Consumer Spending

Earlier this year, Walgreens cut its dividend in half to 25 cents per share to conserve cash as persistent inflation erodes consumer spending on over-the-counter products and puts pressure on reimbursement payments for prescriptions.

David Wagner, portfolio manager and equity analyst at Aptus Capital Advisors, commented, “The results this morning were just absolutely terrible. I mean, it’s kind of been the theme over the last three to eight earnings reports to be brutally honest.” His firm holds 241,583 shares of Walgreens.

Wagner also pointed out that while new CEO Tim Wentworth has a strong track record in healthcare services, investors are closely observing his next moves.

Walgreens anticipates these challenges to persist into fiscal 2025 and remains open to closing additional stores beyond the current review.

Wentworth expressed confidence in the core business, stating, “We have a really strong level of conviction around the core business that we are remodeling here, will be a very different Walgreens,” during a call with analysts.

Along with store closures, Walgreens aims to streamline its U.S. healthcare portfolio, including primary care provider VillageMD. Wentworth told the Wall Street Journal that Walgreens will no longer be VillageMD’s majority owner.

The company has reviewed its Boots UK business and decided to continue investing in it, as communicated in a conference call. As of February, Walgreens had closed 484 stores in the UK and 625 stores in the U.S., according to regulatory filings.

For the financial year ending in August, Walgreens now projects an adjusted profit of $2.80 to $2.95 per share, down from the previously announced range of $3.20 to $3.35 per share in March. Analysts had anticipated an annual profit of $3.20 per share, according to LSEG data.

This revised forecast also impacted rival CVS Health (NYSE:CVS), whose stock fell by about 5% in early trading.

For the third quarter, Walgreens reported adjusted earnings of 63 cents per share, missing estimates of 68 cents.