Walgreens plans to close 1,200 stores in the next three years

Walgreens Boots Alliance will close 1,200 stores over the next three years, with 500 of those stores closing in 2025, the pharmacy giant announced in an earnings call Tuesday.

In the call, Walgreens CEO Tim Wentworth stressed that the company will focus on “stabilizing” its retail pharmacy by getting operating costs under control, improving cash flow, and continuing to “address reimbursement models to support dispensing margins.” Some 6,000 of the retailer’s more than 8,000 stores are profitable, he said — stressing that the rest of the underperforming stores will have to go. 

“Fiscal 2025 will be an important rebasing year as we advance our strategy to drive value creation,” Wentworth said. “This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term.”

Walgreens did not communicate the locations of the closing stores, though all the locations that will be closed are U.S.-based. The retailer operates about 8,700 U.S. stores as well as several thousand overseas. During the call, Wentworth said Walgreens would push to find new employment within the company for workers at the shuttering stores.

This move follows a series of cutbacks for the struggling retailer. In June, Walgreens announced plans to close a “significant number” of its underperforming U.S. retail locations amid what it described as an extremely challenging operating environment.

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“We are at a point where the current retail pharmacy model is not sustainable,” Wentworth said, citing not only pressures on consumer spending but also a challenging pharmacy pricing environment. At that time, Walgreens also said it would reduce its stake in VillageMD, no longer being the majority owner in the primary-care clinic concept. The retailer has also cut hundreds of corporate positions over the past year.

In the earnings call Tuesday, Wentworth stressed that Walgreens would be “reorienting to its legacy strength as a retail pharmacy-led company.” Part of that strategy, he said, includes re-evaluating overall merchandising to offer more private-label brands from the retailer. That push, he said, includes the category of health and wellness, specifically women’s health. 

Walgreens launched over 300 new own-brand SKUs this year, Wentworth said, and the company expects to launch another 300-plus in 2025.

The move to increase private label follows a recent trend. With consumers feeling the pain from inflation, many retailers have opted to be more selective with national brands, instead investing heavily in their own brands.

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Walgreens U.S. comparable retail sales declined 1.7% in this quarter. “The consumer backdrop remains a challenge,” said Walgreens CFO Manmohan Mahajan during Tuesday’s call. Mahajan stressed that sales pressure in the quarter was almost entirely driven by nonessential categories. New product launches during the year drove own brand penetration of 70 basis points in the quarter, finishing at over 17% of sales to end the year. 

Retail adjusted gross margin also improved year over year, positively impacted by category mix towards health and wellness products, partly offset by higher shrink levels.

Walgreens shares were up Tuesday after Walgreens unveiled details of its plan and additionally reported better-than-expected quarterly results.

The retailer said Tuesday that its net loss in the fourth quarter was $3 billion, primarily driven by a higher operating loss, as well as deferred tax assets related to opioid liabilities, and a non-cash impairment charge related to equity investment in China.

Adjusted per-share earnings topped Wall Street expectations by 3 cents and the company’s quarterly revenue of $35.75 billion surpassed analyst projections by $2 billion.

Walgreens net loss to date is a massive $8.6 billion, an increase of 180% compared to the year-ago period, primarily driven by a higher operating loss.

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