As U.S. shoppers continue to pull back on spending, Walgreens is another retail chain feeling the pressure. The pharmacy giant is set to close hundreds of stores over the next three years as part of a plan to cut costs and refocus its business.
Walgreens announced on Tuesday that it will close around 1,200 locations as it struggles with competition from online retailers and shrinking profits from prescription drugs. The struggling drugstore chain plans to shut down 500 stores next year, and about one in seven locations is set to close by 2027.
In June 2024, Walgreens announced the closure of 300 underperforming locations as part of an optimization plan under new CEO Tim Wentworth.
Walgreens has been hard hit by sluggish consumer spending, online competition, and lower reimbursement rates for prescription drugs. The company reported that about a quarter of its 8,600 U.S. locations are unprofitable, leading to closures.
”As the convenient destination for millions of customers and driving $27 billion of retail sales, the store, and its digital channels are central to our strategy and consumer experience," CEO Wentworth said on the firm's quarterly earnings call in June, “But the customer has evolved. Demographics and preferences have shifted, and we need to reposition and operate our stores accordingly.”
Despite the struggles, Walgreens reported 6% revenue growth last quarter compared to the previous year. However, the company also posted a $3 billion loss due to a writedown of investments in a Chinese pharmaceutical chain and a home care provider called CareCitrix. While shares rose nearly 4% in premarket trading, Walgreens’ stock is still down almost 70% for the year.
Walgreens is also scaling back investments in its VillageMD primary care clinics to cut costs and explore potential sales of the subsidiary. The drug store chain’s leadership says these closures are part of a turnaround strategy designed to cut losses and improve operations over time.
“Turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term,” CEO Wentworth said in a statement.
Walgreens isn’t alone in the struggle, with competitors like CVS and Rite Aid also being in the same financial pickle. CVS recently announced 2,900 job cuts as part of a $2 billion cost-saving initiative, adding to 5,000 layoffs disclosed last year.
Drugstores are also facing stiff competition from Target, Dollar General, and other retailers that attract shoppers with cheaper prices and more variety.
