Walgreens Declares Major Downsizing
One of America’s leading drugstore chains, Walgreens, recently announced plans to close a sizeable chunk of its underachieving stores. This massive decision comes as part of a “significant multiyear footprint optimization program.” The program aims to rectify losses and revamp the company’s overall strategy.
Third Quarter Results Leave Wall Street Unimpressed
Walgreens revealed these plans during its third-quarter earnings results. The response from Wall Street was less than favorable as the company’s stock plunged over 20% following this news. The unfavorable performance was attributed to challenging pharmacy industry trends and a worse-than-expected U.S. consumer environment. These factors, along with struggling stores, are major points that Walgreens’ new plan hopes to address as it enters the next quarter.
The exact count of the closing stores and their locations remain undisclosed for now.
One-fourth of Walgreens’ Stores Underperforming, Says CEO
In a recent interaction with industry analysts, Tim Wentworth, the CEO of the parent company Walgreens Boots Alliance (WBA), categorized approximately 25% of Walgreens’ stores as “underperforming.” Wentworth shared few other details about the closures but did mention that the changes would unfold over the upcoming three years.
As per Wentworth’s statement, these closures are the company’s response to a challenging operating environment. Factors including continual strain on the U.S. consumer and marketplace dynamics that have adversely affected pharmacy margins play a key role.
Customers “Absolutely Stunned” by Current Costs
In a conversation with CNBC, Wentworth mentioned how customers are “absolutely stunned” by prevailing costs. This comment comes despite the company’s recent attempt to cut prices on hundreds of items to retain or regain customers who are struggling due to inflation.
A Shift in Employment
Wentworth reassured that the “vast majority” of employees at the affected stores would be offered jobs elsewhere in the company. WBA, whose properties include Duane Reade and Farmacias Benavides, has a workforce of 33,000 people across its 12,500 locations in North America, South America, and Europe.
The closure announcement may impact some of the more than 8,500 stores in the U.S. These stores recently witnessed a workers’ protest in October, where employees including pharmacists walked out due to unfavorable working conditions.
Impacts of “Pharmageddon”
The October worker strike was termed “Pharmageddon,” however, according to pharmacy executives, its overall impact on operations was minimal.
As Walgreens embarks on this new plan, it’s clear the company has some significant challenges to address. Only time will reveal whether this move will give Walgreens the boost it requires to combat unfavorable industry trends and a challenging consumer environment.