Walgreens will close 1,200 stores as retail sales decline

Walgreens is closing approximately 1,200 stores as it struggles to compete with online retailers and dwindling prescription medication payments.

Approximately one out of every seven Walgreens that are currently open will close by 2027. The drugstore chain Walgreens said Tuesday that it will close about 500 locations over the course of the next year.

As part of a multi-year optimization campaign led by CEO Tim Wentworth, the financially troubled company announced in June that it was closing 300 underperforming stores. These closures mark a huge increase from just a few months ago. Around 25% of Walgreens shops were reportedly losing money at the time, according to the business, and the chain pledged "imminent" adjustments.

Nevertheless, the business reported better-than-expected sales for the most recent quarter. Although the chain's revenue increased by 6% over the same quarter last year, Walgreens reported a $3 billion loss, primarily due to the writedown of CareCitrix, a home care provider, and a Chinese pharmacy chain.

Neil Saunders, retail analyst and managing director at GlobalData Retail, described the most recent round of closures as "emblematic of a company that is in trouble and is trying to course correct."

In premarket trading, Walgreens' (WBA) stock increased by about 4%. But for the year, its stock has dropped by about 70%.

The closures occur during a difficult period for drugstore chains, which are facing numerous challenges.

The diminishing profitability from filling prescriptions have caused major drugstore chains, such as Rite Aid and CVS, to struggle in recent years. Lower prescription medication reimbursement rates and Amazon's recent entry into the market have caused them to fall.

As part of a $2 billion cost-cutting program, CVS said earlier this month that it was laying off roughly 2,900 employees. The layoffs, which primarily impact corporate positions, follow the approximately 5,000 job cuts announced the previous year.

Larger rivals, such as Target, put pressure on drugstores' front ends, where they sell snacks and necessities for the home. Even Dollar General's expansion has harmed drugstore businesses in rural areas.

Following competitors, Walgreens dropped prices on over 1,000 items in May in an attempt to get back inflation-weary customers who had been driven off by rising pricing.

CEO Wentworth said in a statement that the “turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term.”