Walgreens Faces Challenges: CEO’s $1 Billion Plan Includes Closing 1,200 Stores
According to The Sun, Walgreens has announced the mass closure of 1,200 stores as part of a strategic shift under the leadership of CEO Tim Wentworth. Over the next three years, the pharmacy chain will shutter these locations, marking a significant change for the retailer.
Wentworth revealed that Walgreens narrowly exceeded Wall Street’s lowered estimates for its fourth-quarter adjusted profit and projected fiscal-year earnings that align with expectations, as reported by Reuters. To further streamline operations, he plans to lay off several mid-level executives and implement a $1 billion cost-cutting initiative.
According to analyst Michael Cherny of Leerink Partners, “At first blush, [the forecast] looks better than worst-case scenario.” However, the closure news indicates that by 2027, one in seven Walgreens stores will be closed. Approximately 500 of the stores slated for closure will shut down within the next year, though their specific locations have yet to be disclosed.
“This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term,” Wentworth stated. While the closures were first mentioned in June, the company had not previously disclosed the total number of affected stores. As of August 31 last year, Walgreens operated over 8,000 locations in the United States.
In its fourth-quarter fiscal year 2024 results, Walgreens reported impairment charges related to its home care provider, CareCentrix, as well as an equity investment in China.
‘Worse Than Expected’
The CEO’s comments follow a steep decline in the retailer’s stock, which dropped over 14% after disappointing third-quarter financial results were released in June. Walgreens has had to revise its profit outlook amid a challenging environment for the pharmaceutical industry and a “worse-than-expected” situation for U.S. consumers.
Also read: Listeria Meat Recall Update: Impact on Walmart, Amazon & Other Retailers
“We continue to face a difficult operating environment, including persistent pressures on the U.S. consumer and the impact of recent marketplace dynamics that have eroded pharmacy margins,” Wentworth noted in the report. “Our results and outlook reflect these headwinds.”
Failed Plans
In a bid to compete with CVS, Walgreens had initially shifted its focus toward primary care services. In October 2021, the company announced a $5.2 billion investment in primary care provider VillageMD to transform itself into a healthcare provider, which included the introduction of doctors’ offices in drugstores. However, in February, Walgreens abruptly closed all of its VillageMD clinics in Florida.
Wentworth has since revealed that Walgreens is scaling back its stake in VillageMD and will no longer maintain majority ownership. “We recognize where we are is a turnaround,” Wentworth said in a press release earlier this year. “We recognize that we need to focus on the aspects of the business that we believe are contributing and have a future, while some parts need to change.”
