Walgreens will close a significant number of US stores, shutting down many unprofitable locations | CNN Business (2024)

New York CNN

Walgreens is set to close a substantial number of its roughly 8,600 locations across the United States as the company looks to reset the struggling pharmaceutical chain’s business.

The company didn’t announce a specific number of store closures, but it said Thursday that it is planning “significant” closures of underperformingstores across America as part of a multiyear optimization program.

CEO Tim Wentworth said on a call with analysts Thursday that “changes are imminent” for the roughly 25% of stores that aren’t profitable and Walgreens’ strategic review will “include the closureof a significantportion of these underperforming stores.”

“We are at a point where the current pharmacy model is not sustainable and the challenges in our operating environment require we approach the market differently,” he said.

In an interview with the Wall Street Journal Thursday, Wentworth said the closures would focus on locations that aren’t profitable, too close to each other or stores struggling with theft.

Walgreens revealed few additional details about the closures on the call, but said they would take place over the next three years. The company also said it will consider additional closures if performance doesn’t improve. The “vast majority” of employees working at affected stores will be offered jobs elsewhere, Wentworth said.

Stock plunges on weak outlook

Walgreens’ (WBA) shares fell 20% to its lowest level in decades. The company also said in its earnings statement that it has slashed its full-year profit outlook.

“We continue to face a difficult operating environment, including persistent pressures on theUSconsumer and the impact of recent marketplace dynamics which have eroded pharmacy margins,” Wentworth said in a press release. “Our results and outlook reflect these headwinds.”

Inflation has taken a big bite out of the drug store business – both at the front-end and the back-end of pharmacies.

Shoppers are “becoming increasingly selectiveand price sensitiveon their selections,” Wentworth said on the call, adding that he forecasts the “operating environment to remain challenging” in the US and doesn’t “expect an improvement.”

Sales rose 2.6% to $36.4 billion for the quarter. That might not “look unreasonable, but this is running below inflation and, across some segments of the business, represents a loss of market share,” Neil Saunders, managing director of GlobalData, said in a note.

Particularly concerning for Walgreens was its retail sales falling 4% for the quarter. But that isn’t surprising because it’s front-of-store struggles have been “exacerbated by the cost-of-living crisis which has seen customers curtailing the volume of products they buy and shopping around more for the best deals and bargains,” Saunders added.

Walgreens slashed prices on more than 1,000 items in May, following rivals in an effort to lure back inflation-weary shoppers turned off by high prices. But the company said Thursday that would hurt its profitability.

Struggles for drug stores

Major drugstore chains, including CVS (CVS) and Rite Aid, have struggled in recent years because of declining profits from filling prescriptions. They’ve declined because of lower reimbursement rates for prescription drugs and new competition from Amazon.

The front end of drugstores, where they sell snacks and household staples, also face pressure from larger competitors, including Target and dollar stores.

Wentworth said in the call that Walgreens’ store assortment will change and it has removed eight national brands and instead started selling similar items produced by its house brands or “preferred partners.” He didn’t specify which brands that have been eliminated, but said it was within the health and wellness categories.

Pedestrians walk by a Walgreens store that was set to close in October of 2021 in San Francisco, California. Walgreens had already shuttered numerous stores in the city since 2019. Justin Sullivan/Getty Images Related article CVS, Walgreens and Rite Aid are closing thousands of stores. Here’s why

Although drugstores benefited during the pandemic from people getting Covid-19 vaccines, fewer consumers are visiting stores to shop. Prescription volumes are also falling because people are getting fewer elective procedures.

GLP-1 drugs, which include Ozempic and Mounjaro to treat weight loss and diabetes hasn’t been a boon for the chain. Wentworth told the Journal it’s losing money on filling those prescriptions.

Pivoting the business model hasn’t helped, either. Walgreens will no longer have a majority stake in VillageMD, a primary care network that the chain once had major plans to open full-service doctors’ offices in hundreds of its stores. Walgreens said the value of its ill-fated VillageMD merger has fallen so much, it was forced to take a massive $6 billion writedown on its balance sheet.

In the past few years, CVS has closed about 900 locations and Rite Aid, which entered bankruptcy in October, closed more than 100.

–CNN’s Nathaniel Meyersohn contributed to this report.

Walgreens will close a significant number of US stores, shutting down many unprofitable locations | CNN Business (2024)

FAQs

Walgreens will close a significant number of US stores, shutting down many unprofitable locations | CNN Business? ›

Walgreens will close a significant number of US stores, shutting down many unprofitable locations. New York (CNN) — Walgreens is set to close a substantial number of its roughly 8,600 locations across the United States as the company looks to reset the struggling pharmaceutical chain's business.

Why are Walgreens locations closing? ›

Walgreens is closing up to a quarter of its 8,600 stores within the United States. Walgreens CEO Tim Wentworth recently explained to the Wall Street Journal on June 27 that the closures would focus on locations that aren't profitable, too close to each other or stores struggling with theft.

Why is Walgreens in trouble? ›

Walgreens and other retailers have been hit by shoplifting and resorted to locking up items or closing high-theft stores since the pandemic, but Walgreens' problems are much deeper, including competition and failed growth strategies.

Which Walgreens stores are closing in 2024 in the USA? ›

Complete list of Walgreens stores closing updated to 2024
#Published DateLocation
207/24/20241303 Copley Rd, Akron, OH 44320
307/11/2024210 E Barnett Rd, Medford, OR 97501
407/11/202425 Peachtree St NW, Atlanta, GA 30303
507/11/202432979 Coastal Hwy, Bethany Beach, DE 19930
16 more rows

Is Walgreens closing stores in Ohio? ›

At least three Ohio Walgreens locations have already shut down in the last year, and the company announced plans to close thousands of locations by 2027, according to a company press release.

Is Walgreens in financial trouble? ›

Experts from across the healthcare industry agree that while Walgreens is currently in a grim financial situation, recovery is still possible. To make this happen, the company will have to relinquish its retail clinic dreams and focus more on making its core pharmacy business as efficient as it can.

Why is Walgreens dropping? ›

Key Points. Walgreens shares plunged after the company lowered its EPS guidance. The company has been experiencing severe drug reimbursement pressures, hurting margins and profitability. The stock has been thrown in the bargain bin, but a potential turnaround will take time.

Why is Walgreens unprofitable? ›

In-Depth Insights. Walgreens and other pharmacies often lose money selling brand name drugs due to agreements with pharmacy benefit managers (PBMs). These groups, who serve as middlemen between health plans and drug manufacturers, negotiate prices with drug companies and set reimbursement rates for pharmacies.

Why is Walgreens performing poorly? ›

Yet it has struggled for years because of financial pressures in its core pharmacy business. Like other pharmacies, Walgreens has been facing smaller revenue growth from prescription drugs, which had been a major driver of sales.

What is the outlook for Walgreens? ›

The 14 analysts with 12-month price forecasts for WBA stock have an average target of 16.86, with a low estimate of 7.00 and a high estimate of 30. The average target predicts an increase of 55.25% from the current stock price of 10.86.

What is the future of Walgreens? ›

Expect a leaner, smaller footprint

One of the things that's likely to happen over the next decade is that Walgreens becomes smaller in size. The company has a lot of physical store locations, but that means a higher level of staffing needs and resources. It also comes with more costs and challenges.

Are US stores closing in 2024? ›

At least 11 retail brands have said they're closing US stores in 2024, totaling up to 1,401 locations. Family Dollar is the largest chain on the list, planning to close at least 600 stores this year. Other companies, such as Walmart and TJX, are closing a few stores while opening many more.

Who owns Walgreens? ›

(WBA) is an American multinational holding company headquartered in Deerfield, Illinois, which owns the retail pharmacy chains Walgreens in the US and Boots in the UK, as well as several pharmaceutical manufacturing and distribution companies.

What is Walgreens new name? ›

In June we changed our name to AllianceRx Walgreens Pharmacy due to our change in ownership.

Is Walgreens owned by Walmart? ›

Does Walmart own Walgreen's stores? No, Walmart does not have any relationship with Walgreens. Sam's Club and Walmart are connected to the same people, and were started by Sam Walton. Walgreen's is a separate company.

Why is Walgreens closing locations? ›

Walgreens is closing up to a quarter of its 8,600 stores within the United States. Walgreens CEO Tim Wentworth recently explained to the Wall Street Journal on June 27 that the closures would focus on locations that aren't profitable, too close to each other or stores struggling with theft.

Why are Walgreens and CVS so close together? ›

Answer and Explanation:

These two have a similar business which compels them to be the most valuable location because if by chance a customer is not satisfied with the Walgreen pharmacies, so they can go to CVS for their satisfaction.

Why are pharmacies struggling? ›

The COVID-19 pandemic led to increased pharmacist burnout and workforce shortages. The impact is still being felt today. The COVID-19 pandemic brought many challenges to the health care industry and highlighted significant limitations in global medical care infrastructure.

Who did Walgreens buyout? ›

Walgreens completes its acquisition of the New York-based Duane Reade drugstore chain. Walgreens acquires a 45 percent stake in Alliance Boots, taking the first step in the strategic partnership to create the first global pharmacy- led, health and wellbeing enterprise.

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