Walgreens announced Tuesday that it plans to close 1,200 stores over the next three years as it seeks to further reduce its store footprint due to weak sales and changing consumer behavior.
The pharmacy chain has announced 500 closures over the next 12 months. It estimates that a quarter of its 8,700 stores in the United States are unprofitable.
Walgreens announced the store closures as part of its fourth-quarter and full-year results, which exceeded Wall Street expectations. Chief Executive Officer Tim Wentworth acknowledged in a statement that the company is in the midst of a “turnaround” that will “take time.”
“We believe there will be significant long-term economic and consumer benefits,” Wentworth said.
Walgreens announced in June that it plans to close a “significant number” of underperforming stores by 2027. Tuesday’s announcement is believed to be the company’s first accurate estimate of how many stores it will close.
Both Walgreens and rival CVS are facing tough business conditions and struggling to stay profitable as consumer habits change.
CVS announced in 2021 that it would close about 900 stores, or about 10% of its U.S. locations, between 2022 and 2024. Rite Aid recently emerged from bankruptcy and will operate as a privately held company.
Pharmacy chains have been pressured in part by changes in the prescription drug market, including reduced reimbursements from pharmacy benefit managers (PBMs), the third-party companies that manage prescription drug benefits for health insurance companies.
PBMs have recently been accused of driving up drug costs and have been the subject of multiple legislative and regulatory reforms and actions.
As a result, more “pharmacy deserts” have sprung up across the United States.
“The retail pharmacy industry is going through a period of soul-searching as it seeks to understand the best models for reaching consumers,” Neil Saunders, managing director of retail at GlobalData, told CNBC in August. spoke.