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Walgreens has announced it will close a large number of stores due to poor financial performance.
The pharmaceutical chain currently has around 8,600 US locations and didn’t specify exactly how many stores will be affected.
CEO Tim Wentworth told analysts in a call on Thursday that changes are “imminent” for roughly 25% of its stores which are unprofitable, according to CNN.
Wentworth added the optimization program will “include the closure of a significant portion of these underperforming stores.”
“We are at a point where the current pharmacy model is not sustainable and the challenges in our operating environment require we approach the market differently,” he continued.
The affected stores may be closed due to unprofitability, proximity to other stores, or difficulties with theft.
CEO: Store closures are a "footprint reduction" not an "employee reduction"
Speaking to the Wall Street Journal, Wentworth said that the “vast majority” of employees working at stores being closed would be offered store elsewhere. “We don’t see this as an employee reduction, we see this as a footprint reduction,” he explained.
“We recognize where we are is a turnaround,” Wentworth said. “We recognize that we need to be focused on what are the parts of the business that we believe are contributing and have a future, and some of those need to change.”
The changes will take place over the next three years, and depending on performance, Walgreens may make further closures.
Following the news, Walgreens’ shares fell to their lowest level in decades.
Since joining the company in October 2023, Wentworth has implemented numerous measures including slashing multiple mid-level executives and a $1 billion cost-cutting plan.
Ongoing store closures affecting employees
In a press release, he cited a tough economy and low consumer spending as the reason for the low profitability of the stores.
“We continue to face a difficult operating environment, including persistent pressures on the US consumer and the impact of recent marketplace dynamics which have eroded pharmacy margins,” he said. “Our results and outlook reflect these headwinds.”
The news follows the plight of other major drug stores including CVS, which shuttered 900 locations in 2021, and Rite Aid, which closed 130 locations in late 2023.
Similarly, companies in the food industry have struggled for profitability, with companies including Hooters and Red Lobster shutting stores to the chagrin of workers uncertain about their future employment status.
