Walgreens To Close 1,200 Stores
Walgreens announced plans to shutter 1,200 stores over the next three years Tuesday as it looks to right the ship amid new competition and declining prescription reimbursement rates.
The closures represent a fourfold increase from the 300 stores the company announced would close as part of a multiyear optimization program in June, CNN reported. The drugstore giant will close its first 500 stores during the company’s next fiscal year.
Walgreens' decision came as it released fourth-quarter earnings showing revenue rose more than 6% compared to the same quarter last year following sales growth from all segments.
But the company’s adjusted operating income was down 38% to $424M on a constant currency basis due to softer U.S. retail and pharmacy performance, according to its latest results. The company also reported a $3B loss due to a write-down of Chinese pharmaceutical chain CareCitrix.
Walgreens stock rose during premarket trading Tuesday morning, but it is down almost 70% for the year.
The three-year plan of store closures is a sign of a troubled company looking to correct course, Neil Saunders, retail analyst and managing director at GlobalData Retail, told CNN.
“Walgreens spent years building its business through acquisitions and neglected the fundamentals of its stores and its retail operations,” he said. “That has pushed a lot of outlets into a position where they are losing sales and are not generating a return.”
In a statement to the outlet, Walgreens CEO Tim Wentworth said a turnaround would take time, “but we are confident it will yield significant financial and consumer benefits over the long term.”
Walgreens is joined by CVS and Rite Aid among pharmacy chains dealing with declining profits.
CVS announced a $2B cost savings initiative earlier this month that will see it reduce its workforce by another 2,900 jobs after cutting approximately 5,000 last year.
As part of its 2023 bankruptcy filing, Rite Aid said it would close up to 500 stores. More than half that number have been shuttered already, including 53 in the latest wave earlier this year.
Walgreens’ 8-K securities filing from August revealed the company was considering selling its stake in VillageMD. The company put around $6.2B into the business to help expand the network of physician’s offices. But it is now “evaluating a variety of options,” as VillageMD has “substantial ongoing and expected future cash requirements,” the filing stated.
That is a change in position from June, when Walgreens planned to reduce its stake in VillageMD but did not plan to sell the business.
