Walgreens Boots Alliance Inc plans to close 14 percent of its US stores to cut costs as consumers pull back spending.

The drugstore chain said Tuesday it will shutter around 1,200 outlets over the next three years, with 500 closures slated for 2025. The shares surged 14 percent at the open of trading in New York.

The company also issued profit guidance for 2025 that met Wall Street estimates.

Adjusted earnings will be in the range of $1.40 to $1.80 a share in the year ending Aug. 31, 2025, Walgreens said Tuesday, in line with the $1.73 average estimate from analysts surveyed by Bloomberg.

Fourth-quarter earnings were $0.39 a share, beating analysts’ average estimate of $0.36 a share. The ailing drugstore chain beat analysts’ expectations — a sign that its aggressive cost-cutting measures are starting to pay off.

“The decisive decision to shutter a large cohort of underperforming stores is a positive in a narrative where the expectations are exceedingly low,” said Jonathan Palmer, an analyst with Bloomberg Intelligence. However, the larger question is how the closures ultimately improves the profitability of the US retail pharmacy segment and the timing of a turnaround, he said.

$3 Billion Loss

In the fourth quarter, the company also posted a $3 billion loss, which mostly included tax charges related to opioid liabilities and a write down of an investment in a Chinese pharmacy chain.

The company said in a filing that it would redeploy the majority of the workforce in stores that are closed.

Walgreens’ retail division has struggled as budget-conscious consumers turn to online retailers like Amazon and discount giants Dollar General and Costco. Competitive pressures led the Deerfield, Illinois-based company to lower full-year guidance for the second consecutive quarter in June and announce store closures, which caused its shares to plunge.

Walgreens’ US retail pharmacy unit posted fourth-quarter revenue of $29.5 billion, exceeding analysts’ expectations of $27.5 billion.

Headwinds in 2025

Chief executive officer Tim Wentworth had previously cautioned that he expects headwinds to persist into 2025. In a statement Tuesday, he said Walgreens is focused on optimising its store footprint, controlling operating costs, improving cash flow, and addressing reimbursement models.

“This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term,” he said.

The US health-care unit, which includes VillageMD, reported revenue of $2.1 billion, in line with analysts’ estimates. Under former chief executive Rosalind Brewer, Walgreens invested $5.2 billion in primary-care provider VillageMD, enabling it to open hundreds of doctors’ offices in its drugstores. This move aligns with the company’s broader strategy to shift away from its retail roots and expand into more lucrative areas of health care.

Walgreens’ international business generated sales of $6 billion, slightly above analysts’ expectations of $5.8 billion. While the company had revived discussions last year about potentially selling the Boots chain, it has since shelved plans for an initial public offering. Wentworth reaffirmed his commitment to investing in Boots and unlocking its potential.

Learn more:

Inside Drugstores’ Expanded Beauty Department Strategy

Walgreens and CVS have added beauty services, more expensive products and new indie and DTC brands, in an attempt to compete with online and specialty beauty stores.

CoverGirl parent Coty, opens new tab on Monday estimated first-quarter like-for-like sales growth below its prior forecast due to a slowdown in the U.S., sending its shares down 6% in after-market trading.

The cosmetics maker projected sales growth on a like-for-like (LFL) basis of between 4% and 5% for the three months ended September, compared to 6% it previously forecast. Coty said very tight order and inventory management by retailers resulted in weakness in certain markets such as the U.S., Australia and China.

The company and rivals including Estee Lauder, opens new tab and L’Oreal, opens new tab have signaled strained consumer spending for beauty and cosmetics products, widely considered an affordable luxury and recession-proof.

Coty now expects second-quarter LFL sales to grow moderately with some acceleration in the second half of the year.

The company said it was re-accelerating its cost-reduction efforts to deliver savings well above the initial target of about $75 million in fiscal 2025 in anticipation of “a more uncertain demand backdrop, including cautious retailer behavior and a complex macroeconomic environment.”

The company, which maintained its annual core profit target, will report first-quarter results on Nov. 6.

By Aishwarya Venugopal and Neil J Kanatt.

Sign up to The Business of Beauty newsletter, your must-read source for the day’s most important beauty and wellness news and analysis.

Learn more:

Coty Misses Revenue Estimates on Cautious Retail Orders, Lacoste License Sale

Coty’s fourth-quarter net revenue rose nearly 1 percent to $1.36 billion, missing LSEG estimates of $1.38 billion.

All companies looking to sell shares in London will face scrutiny over workers’ rights, UK Prime Minister Keir Starmer told Bloomberg Television, in response to questions about whether his new Labour government would welcome a listing by online fashion giant Shein.

“I’m not going to get into individual businesses. What I will say — let me be very clear about it — standards and high standards do matter to us,” Starmer said in an interview with Bloomberg’s Head of Economics and Government Stephanie Flanders at the International Investment Summit in London on Monday. “Of course we’ll be looking at any issue,” he continued, “with a particular feature on the rights of the workforce.”

Shein’s possible initial public offering could help rebuild momentum in London after a string of defections from its stock markets. Valued at $66 billion in its last funding round, Singapore-headquartered Shein confidentially filed papers in June for a possible London IPO, Bloomberg News reported at the time.

A Bloomberg study in 2022 found that garments shipped to the US by Shein were made with cotton from China’s Xinjiang region, where the US State Department has alleged human rights abuses against the Uyghur people, which China denies. Though the firm has said it has a “zero-tolerance policy for forced labor,” an earlier plan to list in New York was met with opposition from US lawmakers.

A share sale in London would also be controversial, after Starmer’s party made boosting protection for workers a key pledge in its election manifesto. The government published draft legislation last week seeing to balance the competing demands of trade unions and business leaders, including greater entitlements to sick pay and protection against unfair dismissal.

“We’ve been really clear that we see that as two sides of the same coin when it comes to growth, good employment rights and protections,” Starmer said. “They’re not a drag on growth. They’re fundamental for growth, and I think pretty well all good businesses understand that.”

By Alex Morales, Irina Anghel and Alex Wickham

Learn more:

Shein: Fashion’s Biggest Polluter in Four Charts

The ultra-fast-fashion giant’s planet-warming emissions have nearly tripled in the last three years as its growth far outpaced other major fashion companies. In Shein’s latest sustainability report, CEO Sky Xu says tackling emissions is “particularly critical.”

For centuries, Africa has been a source of inspiration and botanicals for the world’s biggest beauty companies. (Think of Byredo’s best-selling fragrance Bal d’Afrique, or Diptyque’s use of Madagascan vanilla in its scents.)

Now, the continent’s homegrown brands — including Senegalese perfume brand Réserve en Afrique, South African-born Niche Parfums and Nigeria’s Catherine Omai — are ready to step into the spotlight, using Africa’s rich reserves of ingredients to build brands with niche appeal at a premium price point.

“Africa has been key to the perfumery world for centuries. But there’s not many of us [perfumers],” said Réserve en Afrique co-founder Etienne Haddad. “We’re really trying to create something special that can resonate with consumers both on the continent and abroad.”

But while there’s no shortage of innovation, local players have yet to unlock the market’s full potential. Heavyweights such as Coty, Revlon and Puig dominate the market thanks to their extensive distribution channels, continental-wide marketing efforts and strong brand recognition. Other affluent domestic consumers prefer cult brands, creating a market for niche perfume stores dedicated to providing African consumers with access to global brands such as Le Labo and Maison Crivelli.

“In Africa, international brands are still seen as a status symbol and as an aspirational purchase,” said Rubab Abdoolla, a consultant at market research firm Euromonitor International.

African brands also face limited access to suppliers and manufacturers on the continent and a competitive retail environment, making growth and scale difficult. Plus, the region lacks a known scent profile in the way the Middle East is associated with the dark and woody oud, added Abdoolla.

Despite the headwinds, local players see real opportunity. The South African fragrance market is expected to grow 7.6 percent to reach $672 million, while the Kenyan, Angolan and Nigerian markets are all expected to grow this year, reaching a collective $183 million, per Euromonitor.

To cash in, African perfumers are building the region’s scent profile, leaning on botanicals from across the continent such as Egyptian jasmine, Nigerian ginger and black pepper from Côte d’Ivoire, while also crafting nimble retail and marketing strategies to reach the growing consumer group that wants to invest in high-end beauty products in Africa.

The Smell of Success

In Africa, smelling good (or “expensive”) is a subtle indicator of social status, said Thamani Thothe, founder of Botswana-based White Label Fragrances, which incorporates African ingredients like myrrh and marula oil.

“A lot of people here spend close to $200 on just [one] bottle of fragrance,” said Thothe, describing those purchases as a monthly re-up. “We’ve found success locally because we’ve tapped into that psyche,” she added, pointing to countries within southern Africa — including South Africa, Botswana, Zimbabwe — where the growing middle class are increasingly investing in luxury fragrances.

The dissemination of trends and taste through social media has also been “a game changer”, said South Africa-based Zesipho Mcwango, founder of the fragrance discovery Instagram account The Official Perfume Plug. “Before that, our proximity to luxury and niche brands was zero.”

Despite an increased appetite for luxury fragrances, getting products into consumers hands remains difficult from nation to nation. High shipping costs, custom charges and delays make continental trade near impossible — especially for emerging brands with limited cash flow.

“We should be able to trade amongst ourselves [African countries], but it’s expensive to ship from Botswana to Ghana or Botswana to Kenya; that’s been really challenging,” said Thothe. “If you’re selling a unit for $50, and shipping is $100, it doesn’t make sense.”

There are workarounds. Due to a limited number of physical fragrance stores in countries like Ghana, Côte d’Ivoire and Angola, Accra-based fine fragrance brand Scent of Africa and its founder Tanal Ghandour are betting on travel retail to help expand the brand’s footprint. Those who are catching flights in African countries could likely afford a Scent of Africa perfume (a 50ml fragrance costs $70), said Ghandour. To boot, “everything at the airport represents quality — especially in duty free next to all these international brands,” he said.

A travel retail presence also offers protection against brand dilution — contraband products are a significant challenge in the region, said Euromonitor’s Abdoolla, which she cites as a particular issue in markets such as Cameroon. For emerging brands, being stocked in trusted retail stores is key to boosting consumer confidence.

“Consumers… feel comfortable buying it [in travel retail] because they know they’re not buying a fake product,” said Ghandour.

Another option is to go global – particularly as interest in African-inspired fragrances grows. In Senegalese capital Dakar, Réserve en Afrique’s Kozhevnikov and Haddad believe the niche perfume market in Africa is small and nascent; there’s more opportunity outside its borders.

“For us the goal is to get out globally. We would definitely sell in different African countries where there is opportunity,” said Kozhevnikov, adding that the business currently sells direct-to-consumer in Europe and the US, as well as in select retailers in South Africa.

Hometown Glory

Historically, African perfume brands have not taken up much shelf space, both at home and abroad, which has hindered their growth, particularly when compared with larger brands. As Olaseinde Olusola, co-founder of Nigerian speciality boutique Seinde Signature, said: “People are not going to buy a niche perfume if they’ve never heard of it or if they’ve never experienced it.”

New retailers are surfacing to cater to the growing demand for luxury and niche perfume. International beauty brands are inking deals with well-established African retailers such as The Foschini Group, Lintons Beauty World and Edgars, meanwhile niche perfume brands are finding a new home in smaller dedicated retail stores.

Skins Cosmetics, the Dutch-owned luxury boutique specialising in niche and luxury perfume, is a market leader in South Africa, having opened its first store in 2017. Now, it has six, and its portfolio has jumped from 50 to 75 international brands including cult favourites like Byredo, Maison Francis Kurkdjian and Frederic Malle – as brick-and-mortar is still the preferred shopping method in the region, said Max Priebatsch, director of ASCO, Skins Cosmetics’s parent company.

The retailer’s pre-existing relationship with niche and luxury fragrance brands was key to kickstarting momentum and securing big brands, but some brands were hesitant to make the pivot into Africa. “When we first opened Skins, some brands didn’t join. They came in later after the concept was realised,” said Priebatsch.

Building a robust and competitive fragrance market requires the participation of international brands. “These brands enjoy being adjacent to each other,” said Priebatsch.

For example, in order to stock Creed, Skins Cosmetics had to have other luxury brands including Le Labo, Diptyque and Frederic Malle in its portfolio. “These brands tend to move together in terms of the retail environment.”

Educating consumers is also key. Seinde Signature is currently running a campaign around the idea of “niche perfume,” said co-founder Olaseinde Olusola, adding that the store is investing heavily in sampling, which is already proving successful.

As a small — but growing number — of perfume fans are waking up to the local fragrance scene, they’re also becoming more open to the idea of trying new African brands.

“A lot of Nigerians prefer something that is foreign,” said Olusola. “There’s a preconceived notion that the quality wouldn’t be good, but after experiencing African perfumes, they’ll change their minds.”

Sign up to The Business of Beauty newsletter, your complimentary, must-read source for the day’s most important beauty and wellness news and analysis.