Walgreens, a prominent pharmaceutical chain in the United States, is set to close a significant number of its 8,600 locations as part of a strategic business reset. CEO Tim Wentworth cited the need for changes due to the unsustainable current pharmacy model and the challenges in the operating environment. The closures will target underperforming stores that are not profitable, too close to each other, or struggling with theft. This move comes amidst a difficult operating environment for drugstore chains, with Walgreens facing pressure from declining profits and increased competition.
The company did not specify the exact number of store closures but mentioned that a substantial portion of underperforming stores will be shut down over the next three years. Walgreens’ stock took a significant hit, dropping 20% to its lowest level in decades, and the company revised its full-year profit outlook downwards. Challenges such as inflation, decreasing prescription volumes, and new marketplace dynamics have all contributed to the struggle faced by major drugstore chains like Walgreens, CVS, and Rite Aid. Despite efforts to adapt, including slashing prices and changing store assortments, the company continues to face hurdles in the ever-evolving pharmaceutical landscape.
The decision to close stores is part of a broader trend in the industry, with CVS and Rite Aid also shutting down locations in recent years. Walgreens’ attempt to pivot its business model, such as reducing its stake in VillageMD and facing a $6 billion writedown, reflects the evolving nature of the pharmaceutical business. As consumers become more selective and price-sensitive, traditional drugstores must innovate to stay competitive in a challenging market environment.
