Walgreens plans to close around 1,200 stores in response to increasing competition from online retailers and reduced payments for prescription drugs. By 2027, approximately one in seven of the company’s existing locations will shut down. The first 500 closures are expected to take place over the next year, according to the company’s announcement on Tuesday.
This decision marks a significant shift from June, when Walgreens outlined plans to close 300 underperforming stores as part of a broader multi-year optimization strategy under the leadership of CEO Tim Wentworth. At that time, Walgreens revealed that around 25% of its stores were not profitable, hinting at the need for major adjustments.
Although Walgreens reported stronger-than-expected sales last quarter, with a 6% year-over-year increase in revenue, the company still experienced a $3 billion loss due to a writedown related to a Chinese pharmaceutical chain and CareCitrix, a home care provider.
Despite these financial struggles, Walgreens’ shares saw a nearly 4% rise in premarket trading, although the stock has dropped nearly 70% this year.
Like other drugstore chains, including CVS and Rite Aid, Walgreens is facing declining profits from prescription drug sales due to lower reimbursement rates and rising competition from Amazon. In line with cost-cutting efforts, CVS recently announced 2,900 job cuts as part of a $2 billion initiative. Additionally, Walgreens and other drugstores are losing market share in categories like snacks and household goods to rivals such as Target and Dollar General. In response, Walgreens has lowered prices on more than 1,000 items to attract budget-conscious shoppers.