Walgreens Plans to Close 1,200 Stores Over the Next Three Years

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Facing increasing financial challenges, Walgreens, based in Deerfield, Illinois, announced on October 15 its plan to close around 1,200 locations across the country over the next three years. This decision comes as the company struggles against online competition and declining prescription reimbursements. By 2027, approximately one in seven Walgreens stores will be shuttered, with about 500 closures expected within the next year.

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The closures represent a significant escalation from earlier announcements, where the company indicated in June that it would close 300 underperforming locations as part of a multi-year optimization strategy. At that time, Walgreens noted that around a quarter of its stores were unprofitable and pledged to implement immediate changes.

The planned closures account for about 9.5% of Walgreens’ 12,500 locations globally, although the specific percentage of U.S. stores affected has not been disclosed. Executives previously considered shutting down even more locations, given that 25% of their retail spaces were identified as underperforming. The first wave of 500 closures will take place in the coming 12 months.

Chief Executive Tim Wentworth stated that the company aims to stabilize its retail pharmacy operations, acknowledging that the turnaround process will take time but is expected to yield significant long-term benefits for both finances and consumers. The closures, described as part of an "accretive footprint optimization program," were revealed alongside the company’s quarterly earnings report.

In the fiscal year ending August 31, Walgreens reported a net loss of $8.6 billion on total sales of $147.7 billion. While pharmacy sales rose by 9.6% year-over-year in the fourth quarter, retail sales saw a decline of 3.5%.

Analyst Neil Saunders remarked that these closures highlight the company's ongoing struggles and attempts to correct its course. He noted that years spent focusing on acquisitions led to a neglect of retail fundamentals, resulting in many locations that fail to deliver a return on investment.

Additionally, reports indicate that another 800 stores may be at risk of closure in the future. While this number had not been publicly disclosed before, Walgreens hinted at the possibility of up to 2,000 store closures during an earnings call in June. Following the announcement, Walgreens stock rose by over 12%, suggesting that investors viewed the move as a necessary adjustment.

Looking ahead to fiscal year 2025, the company plans to concentrate on growing its core business areas, particularly in pharmacy and specialty pharmacy services.

As the retail landscape shifts, Walgreens' announcement coincides with similar actions from competitors like CVS Health, which is completing a three-year plan to close 900 stores, and Rite Aid, which has emerged from bankruptcy with around 1,300 locations. This trend raises concerns about access to healthcare and prescription services in various communities, as analysts contemplate the future role of smaller drugstore chains in the U.S. retail market.