Walgreens wants to close about 1,200 of its U.S. retail pharmacies because the healthcare system is changing, profits are going down, and big-box stores and online businesses are becoming more competitive. The layoffs will affect more than 14% of the company’s U.S. operations, and they will happen in stages over the next three years. In the next year, some 500 enterprises will shut down.
Tuesday’s declaration from the firm is a huge step toward its goal of making adjustments. Walgreens said in June that it will close 300 shops that weren’t doing well. Tim Wentworth, the CEO, led the company through a “optimization strategy” that lasted for several years and included that choice. The big drug business was under a lot of pressure to do better when he became CEO in 2023.
At the time, executives from Wentworth and Walgreens indicated that about a quarter of the company’s stores were not doing well or were losing money. People thought the previous closures were planned and restricted in scope, but fresh information suggests that internal studies have found bigger problems that necessitate more drastic steps to fix the business.
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Pharmacy chains are having a hard time with their main business, which is selling prescription drugs, because pharmacy benefit managers (PBMs) and insurance companies are paying them less for such drugs. These middlemen assist businesses and insurance firms get the best deals. This could imply that pharmacies have to fill prescriptions with very little profit or perhaps lose money.
Customers
Walgreens has had some short-term wins, but its money situation is still poor. The company’s most recent quarterly reports showed that revenues were stronger than expected, with a 6% rise over the same quarter previous year. The bad news was that the company lost $3 billion in the last quarter. The company lost a lot of money since it had to sell its stake in a Chinese pharmacy company and its stake in CareCentrix, a company that helps people with home health care. People used to think that these charges were part of Walgreens’ long-term plan to grow, but now they are only hurting the company’s profits.
Investors were cautiously hopeful when they learned the company was closing, even though it wasn’t making much money. In premarket trading, Walgreens’ stock went up by more than 4% after the news. Some folks on Wall Street think that the layoffs are necessary and long overdue moves to save money and make things run better. Since the beginning of the year, the company’s stock price has decreased by more than 70%. This implies that shoppers still don’t know if Walgreens can stay competitive and make money in a retail industry that is always changing.
Tim Wentworth, the CEO, has said several times that Walgreens needs to “modernize and optimize” its company. This means not only establishing more stores but also treating customers and patients better. This includes spending money on digital infrastructure, making inventory more efficient, increasing service in the stores that are still operating, and focusing more on providing healthcare through in-store clinics and relationships with primary care providers.
But the future is unknown, especially since Walgreens’ competitors are also making substantial changes. CVS, for instance, just declared it would let go of 2,900 staff to save $2 billion. It is also closing hundreds of stores and putting more money into health care. Just like other firms that have gone bankrupt and shut down, Rite Aid is likewise letting people go since it doesn’t have enough money.
The shutdown of Walgreens stores will hurt the company and the thousands of people and communities that depend on these stores for basic needs and medicine. Walgreens is one of the few pharmacies in a lot of places, especially in rural or low-income urban areas. It’s a lifeline for people who can’t see a doctor. People who don’t want the stores to close are worried about “pharmacy deserts” and how the closures would damage people who are already fragile, such seniors and families with little finances.
Walgreens will close stores that aren’t making enough money or that don’t have enough consumers. The company hasn’t said which stores would be closing yet, but it has vowed to let the people and communities that will be affected know about each closure ahead of time.
To persuade customers to come back and compete on price, Walgreens lowered the cost of more than 1,000 ordinary items in May. They hoped this would attract more customers who care about price. People thought the decision was made because prices were going up and dollar stores and big-box stores like Target and Walmart were gaining more business, which harmed sales of health items, snacks, and household goods.
The pharmacy business is going through a huge transition that is only starting to happen. Walgreens may have to shut down some stores, which would be horrible for the firm, but it might be what it needs to do to be more adaptable and productive. The organization needs to use new technologies, offer health care services, and focus more on the customer experience if it wants to stay in business.
We don’t know how well this change will work yet, but we do know that pharmacies are changing right now. The decisions that firms like Walgreens make today will decide whether they stay in business or go out of business in the future.
