06-27-2024, 1:38 PM

Walgreens will close a "significant" number of struggling US stores, Says CEO

Walgreens - Video Screenshot

Walgreens plans to close a significant number of its approximately 8,600 locations across the United States as part of a strategy to revitalize its struggling business.

As part of a multiyear optimization initiative, the firm stated on Thursday that it plans to close "significant" numbers of underperforming stores across America. The company did not disclose the exact number of store closures.

According to the CEO who joined the firm in 2023, since 75% of its U.S. locations generate 100% of its adjusted operating income, the company intends to look at closing the remaining 25% of its locations over the course of the next three years. There would be roughly 2,150 shop closures if 25% of its 8,600 stores in the US were closed.

"The current pharmacy model is not sustainable," CEO Tim Wentworth told investors on a Thursday earnings call.

Shares of Walgreens (WBA) dropped 20% to a level not seen in decades. In its earnings announcement, the corporation also stated that it had lowered its projected profit for the entire year.

“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,” Wentworth said in a press release. “Our results and outlook reflect these headwinds.”

According to Wentworth, Walgreens will make an effort to minimize layoffs and retain employees while closing stores. "We intended to redeploy the vast majority of the workforce at the stores we close," he said.

On Thursday, Walgreens also lowered its financial expectations for the upcoming quarter. Nevertheless, CEO Tim Wentworth expressed optimism about the company's future.

"I'm at Walgreens today because I believe in the future of retail pharmacy and particularly our future," he said. "Human-to-human interaction is an imperative in healthcare and the core foundation of our business."

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