Walgreens CEO Says It Will Close 'Significant' Number Of U.S. Stores
Walgreens Boots Alliance is expected to shutter a “meaningful percent” of its 8,600 U.S. stores and back away from pursuing primary healthcare services to improve its bottom line, CEO Tim Wentworth told The Wall Street Journal this week.
Wentworth said the company is in the process of identifying poorly performing locations — about a quarter, or more than 2,000, of its stores — and will decide how many to close over the next few years. Wentworth also said Walgreens would eye closing stores close to one another while reassigning most staff to remaining stores.
“Retail pharmacy is central to our future and to our overall customer and patient experience. It enables many other things, but it has to change,” Wentworth told The WSJ. “We don’t see this as an employee reduction. We see this as a footprint reduction.”
Walgreens has already shuttered 625 stores in the U.S. and another 484 in the UK as of February, Reuters reported.
On the company's earnings call Thursday morning, Walgreens executives lowered their projections for earnings for the remainder of the year after disclosing a 37% drop in adjusted earnings and a net loss of $5.6B in the first nine months of its fiscal year.
Wentworth, who took over the CEO role in October, said on the call that the company has identified $1B in savings as it tries to weather a multi-front storm battering the retail pharmacy business.
“We are finalizing a multifactor store footprint optimization program which we expect will include the closure of a significant portion of these underperforming stores over the next three years,” he said on the earnings call. “We will contemplate additional closures if performance does not improve, which includes external factors such as reimbursement rates.”
Walgreens, like the rest of the drugstore industry, has been battling a number of headwinds in recent years. The 123-year-old company is seeing less revenue growth from its prescription drugs as both consumers flock to online providers and pharmacy benefit managers seek bigger reimbursements when negotiating drug prices on behalf of insurers, The WSJ reported.
One of its major rivals, CVS, already shuttered 500 stores in 2022 and 2023 and plans to close another 300 this year, TheStreet reported. And Rite Aid announced plans in December to shutter 31 more stores as part of its bankruptcy reorganization.
Even blockbuster diabetes and weight-loss drugs like Ozempic and Mounjaro have been losing money for Walgreens, The WSJ reported.
Despite reporting fiscal third-quarter sales of $36.4B, up 2.6% from the same period last year, and net earnings of $344M, which were three times larger than last year, many analysts and investors were disappointed in Walgreen’s latest performance. After reporting its earnings, Walgreens’ stock dropped as much as 25% on Thursday.
Walgreens and other retail pharmacies also are facing labor troubles across the country.
Wentworth, who took over after Rosalind Brewer stepped down in August, already brought on five new executives to the C-suite, the WSJ reported. He also told the paper that Walgreens would reduce its stake in VillageMD, its primary care provider, as it refocused on its pharmacy business instead.
Under Brewer’s leadership, Walgreens purchased a $5.2B stake in VillageMD to become a player in the primary-care and specialty-care sectors. Then earlier this year, Walgreens took a major write-down on the value of its investment in the healthcare company.
“We recognize where we are is a turnaround,” Wentworth told the WSJ. “We recognize that we need to be focused on what are the parts of the business that we believe are contributing and have a future, and some of those need to change.”
