Walgreens is closing multiple Southern California pharmacy locations as it navigates through regulatory pressures and a broader store optimization strategy.
Key Takeaways
- Walgreens will close five Southern California locations, including Los Angeles and Stanton, by late March.
- Regulatory and reimbursement pressures have impacted costs related to rent, staffing, and supplies.
- The closures are part of a plan to optimize Walgreens’s footprint, aiming to close 1,200 stores over three years.
- Efforts are underway to redeploy impacted employees to other stores.
Five Store Closures in Southern California
Walgreens plans to permanently close five retail pharmacy stores in Southern California by late March. Locations affected include Whittier, Los Angeles, Orange, Placentia, and Stanton. These closures are driven by increased regulatory and reimbursement pressures that impact the chain’s ability to cover rent, staffing, and supply costs. The goal is to optimize its footprint by closing about 1,200 locations over the next three years.
Walgreens aims to minimize disruptions for its customers and is actively engaging with community stakeholders. “When closures are necessary, like those here in California, we will work in partnership with community stakeholders to minimize customer disruptions,” stated Marty Maloney. This collaborative approach seeks to ensure that the communities involved face the least possible inconvenience.
Strategies and Financial Implications
The store closures are part of Walgreens’s larger footprint optimization program. Approximately 500 locations are expected to close in fiscal 2025. CEO Tim Wentworth emphasized the importance of stabilizing the U.S. retail pharmacy business as a part of the company’s turnaround strategy. Despite the closures, Walgreens reported quarterly sales of $39.46 billion, albeit with a net loss of $265 million.
“Currently, we see comparable front end sales in our retained store fleet outperforming those stores slated to close this year by approximately 250 basis points and comparable pharmacy scripts by approximately 390 basis points.” – Tim Wentworth
As part of the closures, 93 employees might lose their jobs; however, Walgreens intends to redeploy most affected employees to other store locations. This decision affects various roles, including pharmacy technicians, pharmacists, cashiers, and managers, reflecting the comprehensive impact of the closures.
Industry-wide Challenges
Walgreens, along with other drugstore operators, is facing significant challenges post-pandemic. These challenges include changing consumer habits and financial burdens from opioid settlements. Recently, Rite Aid also closed 31 stores in California as part of a bankruptcy restructuring plan due to declining sales and opioid-related lawsuits.
“Increased regulatory and reimbursement pressures impacting the ability to cover rent, staffing, and supply costs played into the pharmacy store chain’s decision to shutter the locations.” – Walgreens
During these challenging times for the retail pharmacy sector, Walgreens is making strategic and sometimes difficult decisions regarding store operations. The aim is to bolster long-term sustainability and remain a vital part of community healthcare delivery.
Sources
1. Walgreens closing stores in Whittier, downtown L.A.
2. Walgreens permanently closing some stores in Southern California
