Walgreens Announces Plan to Shut Down 1,200 Stores in 3 Years

Due to poor medication reimbursement rates and reduced consumer spending, Walgreens Boots Alliance intends to close 1,200 shops over the course of the next three years, with 500 of those closures scheduled for the upcoming year.

On Tuesday, the Deerfield, Illinois-based company said that it would close about 14% of its U.S. facilities and reassign most of the affected employees. CEO Tim Wentworth of the pharmacy company stated during an earnings call that “we are in a turnaround.”

“The closure of so many stores is emblematic of a company that is in trouble and is trying to course correct,” commented Neil Saunders, managing director of GlobalData. “Walgreens spent years building its business through acquisitions and completely neglected the fundamentals of its stores and its retail operations,” the analyst added.

Walgreens also exceeded experts’ lower projections for fourth-quarter profit and predicted earnings in 2025 that were in line with expectations. The company’s shares surged $1.42, or roughly 16%, to settle at $10.42 a share, or down 60% so far this year, as Wall Street welcomed the announcements.

Wentworth has made several announcements since taking over the company last year, one of which being a $1 billion cost-cutting program.

Walgreens, like other retailers, lowered prices on 1,300 products in its U.S. locations in May in an effort to appeal to consumers weary of inflation.

The business announced in June that it would close a sizable percentage of its 8,600 or more U.S. locations, though it did not specify how many.

According to Wentworth, Walgreens anticipates acquiring almost all of the prescription filling business from the upcoming store closures.

Growing its U.S. retail pharmacy business is a challenge shared by Walgreens and other companies.

Amid lower sales and an increasing number of lawsuits tied to opioids, Rite Aid announced in October that it intended to close 154 locations around the country as part of its bankruptcy filing. Additionally, earlier this month, CVS Health said that it was laying off 2,900 employees in an attempt to save $2 billion in costs.

A CVS representative emailed CBS MoneyWatch to inform them that the job layoffs account for approximately 1% of the health care company’s workforce.

Due to low dispensing costs for Medicaid participants and low reimbursement rates for pharmacy care, pharmacies across the nation, both independent and chain stores, are closing.

Walgreens is suffering along with its rivals as a result of the loss of health insurance for millions of Americans following the termination of a pandemic policy that ensured Medicaid coverage during the medical emergency. Rick Gates, an SVP and the company’s chief pharmacy officer, noted on the call that millions of low-income Americans had been transferred out of the health care program after Medicaid enrollment skyrocketed during the epidemic. He noted a dynamic “where they have not picked up coverage as quickly.”