Walgreens Planning To Close 1,200 Stores in the Coming Years

Walgreens is closing 1,200 stores over the next few years, signaling a major restructuring effort amid financial struggles and changing market dynamics.

At a Glance

Walgreens plans to close approximately 1,200 stores across the U.S. over the next three years.
The closures will affect about 13-14% of Walgreens’ U.S. stores.
The decision is part of a cost-cutting program under CEO Tim Wentworth.
Walgreens reported a $3 billion loss last quarter despite exceeding a $1 billion cost-cutting target.
The company faces challenges from declining consumer spending, low drug reimbursement rates, and competition from online retailers.

Walgreens’ Restructuring Plan

Walgreens Boots Alliance, one of America’s largest pharmacy chains, has announced a significant restructuring plan that includes the closure of 1,200 stores across the United States by the end of 2025. This move comes as the company grapples with financial challenges and aims to streamline its operations in a rapidly changing retail landscape.

The closures, which will affect approximately 13-14% of Walgreens’ U.S. stores, are part of a broader cost-cutting initiative led by CEO Tim Wentworth. The company plans to close 500 stores in fiscal year 2025 alone, signaling an aggressive approach to addressing its financial situation.

Walgreens announces plan to close 1,200 stores over next 3 years https://t.co/Jw4RsK7tZj

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Financial Challenges and Market Pressures

Despite reporting a 6% increase in revenue for the last fiscal year, with fourth-quarter sales in retail pharmacy reaching $29.5 billion, Walgreens has been struggling financially. The company reported a staggering $3 billion loss in the last quarter, even after surpassing a $1 billion cost-cutting target.

The company’s financial troubles are exacerbated by several factors, including declining consumer spending, low drug reimbursement rates, and fierce competition from online retailers like Amazon. The retail sector as a whole has been experiencing declining sales due to rising prices and reduced consumer spending, with several chains filing for bankruptcy.

Impact on Employees and Communities

While the store closures are likely to have a significant impact on local communities, Walgreens has stated its intention to redeploy most affected workers from the closing stores. This move aims to minimize job losses and maintain continuity in customer service.

“This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term,” Wentworth said.

However, concerns have been raised about access to healthcare and prescriptions as drugstores retract from certain areas. This is particularly worrying in light of recent changes to Medicaid coverage, which have left millions of Americans without health insurance since the end of a 2020 health emergency policy that guaranteed coverage.

Future Strategies and Market Outlook

As part of its restructuring efforts, Walgreens is experimenting with smaller, less expensive stores and plans to offer more Walgreens-branded products. The company is also focusing on stabilizing its retail pharmacy business, controlling costs, improving cash flow, and addressing reimbursement models in fiscal 2025.

“They’ve really got to rethink how they do business and, most importantly, what they mean and what value they bring to the customer,” Neil Saunders, managing director of consulting and data analysis firm GlobalData, stated.

Despite the challenges, Walgreens’ shares rose nearly 16% following the restructuring announcements, although they remain down 60% for the year. The company projects adjusted earnings per share of $1.40 to $1.80 for fiscal 2025, indicating cautious optimism about its future performance.

As Walgreens navigates this turbulent period, the success of its restructuring plan will be crucial in determining the company’s long-term viability in an increasingly competitive and digital-focused retail landscape.