Walgreens, the second-largest chain pharmacy in the United States, announced on Thursday its plans to close a “significant” number of underperforming stores due to ongoing challenges in profitability and declining profit margins.
According to the company’s website, this pharmacy giant operates approximately 8,700 stores across 50 states in the United States, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.
While Walgreens did not specify how many stores will be affected, Tim Wentworth, the CEO of Walgreens Boots Alliance, the parent company of Walgreens, told The Wall Street Journal that they are assessing about a quarter of their unprofitable stores and may close a “significant portion” of them in the coming years.
Wentworth also mentioned that Walgreens will reduce its stake in primary healthcare provider VillageMD and will no longer be a majority shareholder in the company.
However, he assured that the company will retain some other divisions and aims to reallocate employees so that the reduction in its U.S. retail business will not result in significant job losses.
“We recognize that we are at a turning point. We understand that we need to focus on the parts of the business that we believe are contributing and have a future, some of which need to change,” Wentworth told The Wall Street Journal.
With a history of 123 years, Walgreens is one of the ubiquitous retail chains in the United States. However, due to financial pressures in its core pharmacy business, Walgreens has been struggling for years.
Like other pharmacies, Walgreens has been facing a decrease in revenue from prescription drugs, which have historically been a major driver of sales for the chain. Additionally, in competition with e-commerce giant Amazon’s online pharmacy subsidiary, Amazon Pharmacy, Walgreens has been losing customers.
In the past year, Walgreens’ stock price has fallen by over 45%. The company now expects adjusted earnings per share for the full fiscal year 2024 to be between $2.80 and $2.95, lower than the previous forecast of $3.20 to $3.35 per share.
The company stated that this change reflects the challenging trends in the pharmacy industry and the consumer environment falling short of expectations.
Wentworth mentioned that despite Walgreens showing solid performance in the international and U.S. healthcare sectors, the company’s financial results and prospects still reflect these adverse factors.