Walgreens Boots Alliance plans to close 1,200 stores during the next three years, with 500 closures set for next year, in the face of low drug reimbursement rates and slower consumer spending.
The Deerfield, Illinois-based company on Tuesday said it would shutter roughly 14% of its U.S. locations and redeploy the majority of the workers impacted. "We are in a turnaround," Tim Wentworth, the drugstore chain's CEO, told an earnings call.
"The closure of so many stores is emblematic of a company that is in trouble and is trying to course correct," commented Neil Saunders, managing director of GlobalData. "Walgreens spent years building its business through acquisitions and completely neglected the fundamentals of its stores and its retail operations," the analyst added.
Walgreens also beat reduced estimates for fourth-quarter profit, and projected 2025 earnings that met analysts' expectations. Wall Street embraced the announcements, with shares of the company up 92 cents, or 10%, at $9.92 in morning trading.
Since taking the helm last year, Wentworth has announced multiple steps, including a $1 billion cost-cutting program.
Walgreens in May cut prices on 1,300 products across its U.S. stores, following other retailers in looking to appeal to inflation-weary customers.
The company in June said it would close a significant portion of its roughly 8,600 U.S. stores, but did not disclose the exact number.
Wentworth said Walgreens expects to take nearly all of the prescription-filling business from the to-be-closed stores with it.
Walgreens is not alone in struggling to grow its U.S. retail pharmacy business.
In October, Rite Aid said it planned to shutter 154 stores nationwide as part of its bankruptcy filing, which came amid slumping sales and mounting opioid-related lawsuits.
Pharmacies — both independent locations and retail chains — are closing around the country amid low reimbursement rates for pharmacy care as well as low dispensing fees for Medicaid enrollees.
Like its competitors, Walgreens is feeling the impact as millions of Americans have lost health insurance since the end of a pandemic policy that guaranteed Medicaid coverage during the health emergency. After Medicaid enrollment ballooned during the pandemic, millions have been moved out of the health care program for low-income Americans, Rick Gates, an SVP and the company's chief pharmacy officer, said on the call, noting a dynamic "where they have not picked up coverage as quickly."
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