Walgreens to close many stores as profits plummet

The Deerfield, Illinois-based pharmacy giant said it was considering closing 25% of its stores due to poor performance, and Mr. Wentworth said most of the employees would be transferred to other stores.

The company hasn’t disclosed the specific locations it will close, but the scale of the move could put more Americans at risk of living in pharmacy deserts.

Over the past two years, the nation’s largest pharmacy chains have been closing stores. Walgreens, which has closed 2,000 stores over the past decade, has closed 484 stores in the U.S. since February. Rite Aid, which filed for bankruptcy last year, has closed more than 500 stores. CVS has closed about 300 stores this year after announcing in 2021 that it would close 900 stores over three years.

Pharmacies can be a lifeline in rural and low-income areas, especially food deserts where access to healthy, affordable food is limited. Pharmacists are often the most accessible health professionals for these communities.

Retail pharmacy chains rely on selling medicines and other health care items, as well as food and other goods, but consumers have cut back on discretionary purchases over the past year.

Wentworth echoed what other retailers have said this year, saying inflation-weary customers are “becoming more selective and price-sensitive in their purchases.”

Walgreens’ retail sales fell 4% in the most recent quarter. That was up 2.6 percent from a year earlier. Total sales, which includes British pharmacy chain Boots, rose 2.6 percent. “While this is a modest increase, it means we have lost market share to faster-growing competitors,” said Neil Saunders, managing director at GlobalData.

“Walgreens has been losing customers in its stores for some time and this long-standing trend has been exacerbated by the rising cost of living which is causing customers to buy less merchandise and shop around in search of good deals and bargains,” Sanders said.

He added that Walgreens’ uncompetitive pricing has been an obstacle for the chain.

Wentworth said the company is investing in targeted promotions and price reductions but “will remain heavily weighted on near-term profitability as we refine our approach.”

Walgreens, which lowered its profit forecast for this year, plans to revamp its store assortment, exit the primary-care business and build out its loyalty rewards program.

The company plans to expand its private label brands and focus its branded offerings on only those that “contribute to our success,” Wentworth said. Last quarter, the chain removed eight national brands from its health and wellness department and replaced them with Walgreens-branded products. The company also plans to focus on same-day delivery.

Walgreens shares were down 25 percent by midday Thursday.

Job cuts are long overdue at national pharmacy chains, as sluggish pandemic-era sales of COVID-19 vaccines, at-home testing kits and other products have weighed on profits, retail analysts say. The industry is also struggling with increased competition, changing consumer behavior, retail crime, staffing shortages and a lack of investment in stores.

at the same time, Chains have faced declining profit margins on drugs, largely due to pharmacy benefit managers (PBMs), which negotiate with insurers, pharmacies and drug companies over coverage of certain prescription drugs, prescription drug prices and pharmacy reimbursement rates.

Meanwhile, employees at the nation’s largest pharmacy chains have been vocal about working conditions, with Walgreens and CVS workers staging multiple walkouts over the past year. Twelve employees told The Washington Post that conditions have gotten worse during the pandemic, and that pharmacy staff have been asked to do more with less and that standards have declined over the past two years.

Pharmacy employees say the store closures have exacerbated workload issues, as remaining stores are being inundated with even more prescriptions but have few additional staff to handle the workload.

Wentworth said Walgreens is working with pharmacy chiefs and industry associations to recruit pharmacists and “reinvigorate the local pharmacy workforce supply chain,” adding that the company will also be ramping up pharmacy services such as vaccinations to attract more patients.

Hannah Ziegler contributed to this report.