Walgreens to Close 1,200 Locations Amid Struggles with Online Competition and Declining Prescription Revenues
Walgreens, one of the largest drugstore chains in the United States, announced it will close approximately 1,200 stores by 2027. This move represents about one in seven of its current locations and is part of a broader effort to adjust to increasing competition from online retailers and reduced prescription drug payments, which have hurt profitability.
In the next year, Walgreens plans to shut down 500 stores, a significant escalation from its June 2024 announcement to close 300 underperforming locations. These closures are part of a multi-year optimization strategy led by CEO Tim Wentworth, aimed at addressing the company’s financial challenges. Nearly a quarter of Walgreens stores are currently unprofitable, according to the company, necessitating “imminent” changes.
Financial Performance and Strategic Shifts
Despite these challenges, Walgreens reported stronger-than-expected sales in the last quarter, with revenue increasing by 6% compared to the same period last year. However, the company also posted a $3 billion loss, largely due to writedowns related to a Chinese pharmaceutical chain and CareCitrix, a home care provider.
Shares of Walgreens (WBA) saw a 4% rise in premarket trading following the announcement, though its stock remains down nearly 70% for the year, underscoring the financial difficulties the company faces.
Drugstore Chains Under Pressure
Walgreens is not alone in its struggles. Major drugstore chains like CVS and Rite Aid have also faced declining profits, driven by lower reimbursement rates for prescription drugs and increased competition from companies like Amazon. CVS recently announced plans to cut 2,900 jobs as part of a $2 billion cost-saving initiative, on top of the 5,000 positions eliminated last year.
In addition to prescription-related challenges, drugstores are facing competition from retailers like Target and Dollar General, especially in rural areas. To counter this, Walgreens slashed prices on more than 1,000 items in May, aiming to attract inflation-weary customers who had been deterred by high prices.
Outlook and Recovery Plans
Despite these significant challenges, CEO Tim Wentworth remains optimistic, stating that the company’s turnaround will take time but will ultimately deliver substantial financial and consumer benefits.
As Walgreens moves forward with these store closures and strategic adjustments, its ability to adapt to changing market conditions will be crucial to its long-term success.