Walgreens to Close 1200 Locations Amidst Online Competition and Declining Prescription Drug Payments

Walgreens to Close 1,200 Locations

Walgreens is set to close around 1200 locations as the chain grapples with fierce online competition and declining prescription revenues. By 2027, nearly one in seven stores will be shuttered, with about 500 closures anticipated within the next year alone.

This announcement marks a significant escalation from earlier plans to close 300 underperforming stores as part of a multi-year strategy initiated by CEO Tim Wentworth. In June, Walgreens revealed that approximately 25% of its locations were unprofitable and promised immediate changes.

Despite a recent uptick in sales—reporting a 6% revenue increase compared to last year—Walgreens still faced a staggering $3 billion loss, largely attributed to a writedown of its Chinese pharmaceutical business and CareCitrix, a home care provider.

Retail analyst Neil Saunders noted that these closures reflect a company in distress attempting to realign its operations. He pointed out that Walgreens has historically focused on acquisitions while neglecting its core retail fundamentals, leading to a decline in sales across many outlets.

While Walgreens’ shares rose nearly 4% in premarket trading, the stock remains down almost 70% year-to-date. The entire drugstore industry is under pressure, with chains like CVS and Rite Aid also facing declining profits from prescriptions due to lower reimbursement rates and increasing competition from online retailers like Amazon.

CVS recently announced plans to cut about 2,900 jobs as part of a $2 billion cost-saving initiative, adding to job reductions from the previous year. Additionally, the retail front of drugstores is being squeezed by larger competitors like Target and the growth of discount chains such as Dollar General, particularly in rural areas.

In response to these challenges, Walgreens reduced prices on over 1,000 items in May to attract cost-conscious shoppers. CEO Wentworth stated that the turnaround process will take time, but he remains optimistic about long-term financial and consumer benefits.

Saunders acknowledged that while cutting underperforming locations may strengthen Walgreens’ financial standing, it also serves as a significant admission of past missteps.

Walgreens to Close 1200 Locations Amidst Online Competition and Declining Prescription Drug Payments