- Walgreens will close 1.2K stores over the next 3 years, starting with 500 closures in the next fiscal year.
- The company reported 6% revenue growth in 4Q24 but faced a 38% drop in adjusted operating income, driven by weaker U.S. retail performance.
- Competitors CVS and Rite Aid are also closing stores and cutting jobs in response to falling profits in the pharmacy sector.
Walgreens (WBA) has announced plans to shut 1.2K stores over the next three years as it grapples with declining profits and increasing competition, as reported by Bisnow.
CVS Health Corp (CVS) and Rite Aid (RADCQ) are also scaling back operations as they navigate similar financial pressures.
More Store Closures
Walgreens initially planned to close 300 stores as part of its multiyear optimization program, but the company has now quadrupled that number by 2027. The first 500 stores will close in the next fiscal year.
Despite revenue growth in Q4, adjusted operating income dropped by 38% due to softer performance in the pharmacy chain’s U.S. retail and pharmacy segments.
Pressure Point
Walgreens’ latest financial results revealed a $3B loss linked to a write-down of Chinese pharmaceutical chain CareCitrix. The company’s stock, which rose in premarket trading following the announcement, is down nearly 70% for the year.
Retail analyst Neil Saunders noted that Walgreens’ aggressive acquisition strategy weakened its core retail operations, leading to fewer sales and lower profitability across many outlets.
Too Early to Say
Walgreens isn’t alone in feeling the pressure. CVS recently announced another round of job cuts—2.9K positions—as part of a $2B cost-saving initiative. Similarly, Rite Aid is closing up to 500 stores after its 2023 bankruptcy filing.
These closures come as the pharmacy sector faces ongoing challenges from falling prescription reimbursement rates and rising operational costs.
Walgreens is also rethinking its $6.2B investment in VillageMD, a network of physician offices it helped expand. Though the company initially planned to reduce its stake, it’s now considering selling its share entirely as VillageMD faces significant cash requirements moving forward.
In Summary
Walgreens’ plan to close 1.2K stores reflects deep challenges within the pharmacy industry, where rising competition and falling profits are forcing major restructuring efforts.
