Walgreens is closing approximately 1,200 locations due to competition from online retailers and declining prescription drug payments. By 2027, one in seven Walgreens stores will close, with 500 locations shutting down within the next year. This decision comes after the company announced the closure of 300 underperforming stores earlier in the year as part of a restructuring plan.
Despite posting stronger-than-expected sales in the past quarter, Walgreens reported a $3 billion loss due to a writedown of a Chinese pharmaceutical chain and a home care provider. The closures are seen as a way for the struggling company to course correct and address its declining sales and profitability. Retail analyst Neil Saunders noted that Walgreens focused on acquisitions and neglected the fundamentals of its stores and retail operations, leading to a decline in sales and profitability.
Shares of Walgreens rose nearly 4% in premarket trading following the announcement of the closures, but the stock is down nearly 70% for the year. The closures are part of a broader trend in the drugstore industry, with major chains like CVS and Rite Aid also facing challenges due to declining profits from filling prescriptions. CVS recently announced job cuts as part of a cost-saving initiative, adding to the layoffs from the previous year.
The front-end of drugstores, where they sell snacks and household staples, is also facing pressure from larger competitors like Target and Dollar General. Walgreens has slashed prices on over 1,000 items in an effort to attract shoppers and compete with rivals. CEO Tim Wentworth expressed confidence in the company’s long-term prospects but acknowledged that the turnaround will take time. Saunders believes that the closures will ultimately help strengthen Walgreens’ financials but views them as a significant admission of failure.
Overall, the closure of approximately 1,200 Walgreens locations reflects the challenges facing the drugstore chain amid increased competition from online retailers, declining prescription drug payments, and pressure from larger competitors. Despite posting stronger sales in the past quarter, the company reported a significant loss due to writedowns. The closures are part of a broader trend in the industry, with other major drugstore chains also facing challenges and implementing cost-saving measures. However, CEO Wentworth remains optimistic about the company’s future prospects, but analysts like Saunders see the closures as a necessary step to address the company’s underlying issues.
