Major Walgreens Store Closures Imminent

In an aerial view, a customer enters a Walgreens store on January 04, 2024 in San Pablo, California. The company said it was looking to close a number of its stores in the U.S. over the next few years.

Walgreens will shut down a significant number of its locations over the coming years, part of a move to reduce outlets that are not profitable, the company said on Thursday.

The pharmacy chain has been examining ways to reduce its footprints, and one approach is to close stores that are near one another to create more efficient ways of serving customers.

The company, which has struggled amid emerging competitors like Amazon and a decline in consumer spending, reported third-quarter results that showed operating income rose to $111 million after a loss of $477 million the same time a year ago.

"Approximately 25 [percent] of Walgreens stores are not contributing to our long-term strategy," the company said in a statement to Newsweek. "We're finalizing an optimization program that we expect will include closing a significant portion of these locations over the next three years. We are also taking a series of actions and making investments to enhance the customer and patient experience."

Sales were up 2.6 percent to $36.4 billion, but the company lowered its earnings per share guidance to $2.80 from $2.95 for the year, "reflecting challenging pharmacy industry trends and a worse-than-expected U.S. consumer environment," it said in a statement.

In its results announcement, Walgreens said that it was "finalizing [a] significant multiyear footprint optimization program to close certain underperforming U.S. stores."

"We continue to face a difficult operating environment, including persistent pressures on the U.S. consumer and the impact of recent marketplace dynamics which have eroded pharmacy margins," Wentworth said in the statement. "Our results and outlook reflect these headwinds."

The company will be focusing on its core segment of retail pharmacy, he said.

"We are addressing critical issues with urgency and working to unlock opportunities for growth. Many of these actions will take time, but I am confident that we have the right team and the right strategy to lead a business turnaround for the Walgreens that our customers and patients need," Wentworth added.

Wentworth told The Wall Street Journal that the total number of stores to be closed has yet to be finalized, but it was looking at about one-quarter of its 8,600 stores that are underperforming. A "meaningful percent" of those units may be shut.

"We recognize where we are is a turnaround," Wentworth told The Wall Street Journal. "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 move to reduce its footprint is unlikely to lead to mass layoffs as employees at locations that are set to shut will be moved to other stores, he said.

"We don't see this as an employee reduction, we see this as a footprint reduction," Wentworth told the outlet.

As of 10:20 a.m. ET Thursday, the company's share price was down more than 20 percent, according to Google Finance data.

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