Walgreens has announced massive store closures across the United States as part of a major cost-cutting strategy. Will your local Walgreens be one of the casualties? Find out which locations are set to close first and discover the reasons driving this major decision by the pharmacy giant.
How many Walgreens stores will shut down?
On October 15th, Walgreens revealed its plans to close 1,200 stores over the next three years, as new CEO Tim Wentworth steers the company toward a turnaround.
Walgreens CFO Manmohan Mahajan outlined that 500 stores are scheduled to shut down in 2025, targeting locations with negative cash flow and underperforming stores with leases expiring in the near future.
These closures are part of a broader set of cost-cutting measures introduced by Wentworth, who took the helm in 2023. Other initiatives include the removal of several mid-level executive positions and the implementation of a $1 billion cost-saving program.
“This turnaround will take time, but we are confident it will deliver significant financial and consumer benefits over the long term,” Wentworth stated.
As of August 31st, 2023, Walgreens operated over 8,000 stores nationwide.
Why is Walgreens closing thousands of stores?
Walgreens is closing thousands of stores due to a combination of sluggish consumer spending and low reimbursement rates for prescription drugs. Pharmacy chains, in general, are grappling with multiple challenges, including consumers steering away from high-priced items and increasing pressure from pharmacy benefit managers over reimbursement payments for filling prescriptions.
Despite narrowly surpassing Wall Street’s reduced expectations for fourth-quarter adjusted profit, Walgreens continues to face significant macroeconomic challenges. On the day the store closures were announced, the company’s shares surged 12.3% to $10.11, though its stock has plummeted by 65% this year, marking it as the worst performer on the S&P 500 index.
“At first glance, the forecast seems better than the worst-case scenario,” Michael Cherny, an analyst at Leerink Partners, told Reuters while noting that Walgreens remains affected by broader economic pressures that persisted through the quarter.
In the fourth quarter of fiscal 2024, Walgreens reported $3 billion in losses, largely driven by goodwill impairment charges related to its home care division, CareCentrix, and equity investments in China. This is a stark contrast to the $180 million loss it reported the previous year.
Excluding these charges and other one-time costs, Walgreens earned 39 cents per share, exceeding analysts’ expectations of 36 cents, according to data from LSEG. For fiscal 2025, the company anticipates adjusted earnings between $1.40 and $1.80 per share, compared to estimates of $1.73.