On October 15, Walgreens announced plans to close 1,200 of its stores, with the immediate goal of shutting down 500 locations within the next year. By 2027, it is projected that one in every seven Walgreens stores currently in operation will be closed.
CNN has reported that Walgreens is grappling with challenges such as increasing competition from online retailers and a decline in prescription drug prices. The latest closure announcement marks an expansion of previously mentioned numbers from just a few months ago.
Faced with financial pressure, Walgreens CEO Tim Wentworth unveiled a restructuring plan in June that included closing 300 underperforming stores. The company revealed that approximately 25% of its locations were unprofitable and that urgent reform was necessary across its operations.
Despite exceeding expectations in its last quarterly earnings report, which showed a 6% increase in profits compared to the same period last year, Walgreens still faced a staggering loss of $3 billion, influenced by debt write-downs from a Chinese pharmaceutical firm and home care company CareCitrix.
Neil Saunders, a retail analyst from GlobalData, pointed out that Walgreens’ recent announcement of closures reflects the company’s effort to adjust its strategy during challenging times. He shared with CNN that while Walgreens expanded its business through acquisitions over the years, it neglected the fundamentals of store and retail operations, leading to declining sales and a lack of profitability at many locations.
Furthermore, Walgreens’ stock has plummeted nearly 70% this year. In response to consumer cutbacks on high-priced items amid rising inflation, the company announced over a thousand product price reductions back in May.
The retail pharmacy sector as a whole has been facing significant challenges in recent years. Competitors like CVS and Rite Aid have also seen declines in sales due to reduced reimbursement rates for prescription drugs, coupled with new competition from Amazon’s pharmacy. CVS announced a reduction of 5,000 positions last year and further plans to save $2 billion this year, along with laying off 2,900 employees.
