Walgreens Boots Alliance announced on Tuesday its intention to close 1,200 stores across the US in the next three years as part of a broader strategy to revitalize the pharmacy chain, which has been facing significant financial pressures due to low drug reimbursement rates and slower consumer spending.
The closures, which include 500 stores expected to shut down in fiscal 2025, come as CEO Tim Wentworth implements several cost-cutting measures, including a $1 billion initiative aimed at reducing expenses. Under Wentworth’s leadership since last year, Walgreens has made efforts to address its operational challenges, including reducing prices on 1,300 products to attract inflation-weary customers.
“This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term,” Wentworth stated in a release.
Despite the announcement, Walgreens reported fiscal fourth-quarter sales of $37.55 billion, surpassing Wall Street expectations, and a small adjusted profit of 39 cents per share. The company’s US retail pharmacy segment generated $29.47 billion in sales for the quarter, reflecting a 6.5% increase from the previous year, primarily due to rising pharmacy sales. However, comparable retail sales saw a decline of 1.7% due to a challenging retail environment.
The decision to close stores is part of a larger trend in the pharmacy sector, where both independent and retail chains are grappling with low reimbursement rates and declining sales. Walgreens, which operates approximately 8,700 locations nationwide, reported that nearly a quarter of its stores are currently unprofitable.
The company is not alone in facing difficulties; Rite Aid recently announced plans to close 154 stores as part of its bankruptcy filing amid slumping sales and mounting legal issues related to opioid distribution.
Walgreens’ stock, which has significantly underperformed this year, rose about 4% in pre-market trading following the earnings report. Investors reacted positively to the company’s efforts to cut costs and improve its financial outlook.
CNBC, CBS News, and New York Post contributed to this report.
