Story by Franca Akenami
Walgreens is preparing to shut down a significant number of its approximately 8,600 stores across the United States as it seeks to overhaul the struggling pharmacy chain's operations.
While the company didn't reveal an exact figure for store closures, it announced on Thursday that it plans "significant" shutdowns of underperforming outlets nationwide as part of a multi-year optimization strategy.
In an interview with the Wall Street Journal, CEO Tim Wentworth stated that the store closures would constitute a "meaningful percent" of the roughly one-fourth of locations that are underperforming.
The focus will be on shutting down stores that aren't profitable, are too close to each other, or are grappling with theft issues, Wentworth said.
Shares of Walgreens plummeted nearly 9% in premarket trading, following the announcement during its earnings report that it has cut its full-year profit forecast.
"We continue to face a difficult operating environment, including persistent pressures on the U.S. consumer and the impact of recent marketplace dynamics which have eroded pharmacy margins," Wentworth said. "Our results and outlook reflect these headwinds."
Sales increased by 2.6% to $36.4 billion for the quarter. However, Neil Saunders, managing director of GlobalData, noted in a statement that this might not "look unreasonable, but this is running below inflation and, across some segments of the business, represents a loss of market share.”
Walgreens has been hit hard with a 4% drop in retail sales for the quarter. This is largely due to the ongoing cost-of-living crisis, which has seen customers buying fewer products and shopping around more for the best deals, according to Saunders.
In an attempt to attract back shoppers deterred by inflation, Walgreens cut prices on over 1,000 items in May, following the lead of its competitors.
Major pharmacy chains such as CVS and Rite Aid have faced difficulties in recent years due to falling profits from prescription services. This decline is attributed to lower reimbursement rates for prescription drugs and new competition from Amazon.
The pharmacies, where they sell snacks and household essentials, also face competition from larger rivals, including Target and dollar stores. Over the past few years, CVS has shut down approximately 900 locations, while Rite Aid, which filed for bankruptcy in October, has closed over 100 stores.
