Walgreens announced Tuesday that it will close 1,200 of its stores in the next three years as it looks to reduce its footprint due to declining sales and changing consumer behavior.
The pharmacy chain announced that 500 stores would close over the next year. The company estimates that a quarter (8700) of its stores in the U.S. are unprofitable.
Walgreens announced its closures in conjunction with its fourth quarter and full-year earnings, which exceeded Wall Street’s predictions. In a press release, CEO Tim Wentworth acknowledged that the company is in the middle of a “turnaround,” which will “take time.”
Wentworth stated, “We’re confident that it will provide significant financial and consumer benefit over the long-term.”
Walgreens announced in June that it would close “significant” numbers of underperforming stores before 2027. The company announced Tuesday that it has a first-ever estimate on how many stores will be closed.
Walgreens, as well as CVS’s rival, are both facing a challenging operating environment. They must fight to remain profitable while consumers change their habits.
CVS announced that it would be closing 900 stores in 2021. This is about 10% of the US locations. Rite Aid emerged from bankruptcy recently and will now operate as a private company.
The prescription drug market has changed, and pharmacy chains are feeling the pinch. This includes lower reimbursements by third-party companies who manage prescription drug benefits on behalf of health insurance companies.
Recent accusations have targeted PBMs for inflating drug prices and they are now the subject of numerous legislative and regulatory reforms.
This has led to an increase in “pharmacy desertion” throughout the U.S.
In August, GlobalData Retail Managing Director Neil Saunders said that the retail pharmacy industry was going through a soul-searching period, trying to determine the best way to reach consumers.
