Walgreens, one of America’s largest pharmacy chains, has announced plans to close a “significant” number of its 8,700 US stores. This decision comes as the company cuts its profit forecast for fiscal year 2024, reflecting ongoing challenges in consumer spending and increased competition in the retail sector.
While the exact number and locations of store closures remain unspecified, CEO Tim Wentworth suggested in an interview with the Wall Street Journal that the company could shutter a “meaningful percent” of the quarter or so of locations that are underperforming. The closures will primarily target stores that are unprofitable, in close proximity to other Walgreens locations, or struggling with theft issues.
This news has sent shockwaves through the market, with Walgreens shares falling more than 15 percent in premarket trading, adding to a 40 percent decline for the year to date. The Illinois-based company, which also operates under the Duane Reade banner, is grappling with slumping sales and what retail expert Neil Saunders describes as “lackluster” deals and high prices.
Saunders, managing director of GlobalData, points out that Walgreens has long been losing front-of-store customers – those who shop there for items other than medication. He attributes this trend to the ongoing cost-of-living crisis, which has led customers to shop around more aggressively for the best deals and bargains.
The company’s struggles are further compounded by declining demand for COVID-related products and inflation-weary consumers cutting back on spending. In response, Walgreens is not only closing stores but also aiming to simplify its healthcare portfolio in the country, including its relationship with primary care provider VillageMD.
Investors are looking to CEO Tim Wentworth, who joined the company last October, to steer Walgreens through these challenging times with new strategies and cost-saving efforts. The company has revised its adjusted profit forecast for the financial year ending August to $2.80 to $2.95 per share, down from the previous $3.20 to $3.35 per share forecast in March.
This restructuring comes on the heels of previous store closures, with Walgreens having shut 484 stores in the UK and 625 stores in the US as of February 2024, according to regulatory filings.
As Walgreens navigates this period of significant change, the impact on employees, communities, and the broader retail landscape remains to be seen. The company’s struggles reflect wider challenges in the retail and pharmacy sectors, as businesses adapt to changing consumer behaviors and economic pressures in a post-pandemic world.
