Walgreens will be closing what The Wall Street Journal reports will be a “significant share” of its approximately 8,600 U.S. stores.
The Journal report, from an interview with Walgreens Boots Alliance Chief Executive Officer Tim Wentworth, quoted Wentworth as saying Walgreens would close a “meaningful percent” of underperforming stores over the next several years.
Wentworth indicated Walgreens will also be reducing its investment in Village MD, a primary care provider.
“We recognize where we are is a turnaround,” Wentworth said. “We recognize that we need to be focused on what are the parts of the business that we believe are contributing and have a future, and some of those need to change.”
The CEO of the 123-year-old chain, who began his role with Walgreens in October, said “retail pharmacy is central to our future and to our overall customer and patient experience. It enables many other things, but it has to change.”
Stores that are close to one another will be at the top of the list for closing, Wentworth indicated.
Theft also remains an issue, he indicated.
Walgreens will seek partnerships with cities to save stores through “investing in public safety so that our customers and employees feel safe,” Wentworth added.
Wentworth said staff will be reassigned where possible.
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“We don’t see this as an employee reduction, we see this as a footprint reduction,” he explained.
On Thursday, Walgreens revealed that sales at stores open for at least one year fell 2.3 percent from last year’s level. Profits took a hit from promotions to attract customers and from theft, according to Fox Business.
“We continue to face a difficult operating environment, including persistent pressures on the U.S. consumer and the impact of recent marketplace dynamics which have eroded pharmacy margins,” Wentworth said.
Walgreens now projects that its fiscal 2024 full-year adjusted earnings will be in the range of $2.80 to $2.95 per share, which is lower than its former estimate of $3.20 to $3.35 a share.
As a result, Walgreens share prices dropped more than 20 percent, according to CNBC.
“Seventy-five percent of our stores drive 100% of our profitability today,” Wentworth said. “What that means is the others we take a hard look at, we are going to finalize a number that we will close.”
“We assumed … in the second half that the consumer would get somewhat stronger” but “that is not the case,” Wentworth said.
“The consumer is absolutely stunned by the absolute prices of things, and the fact that some of them may not be inflating doesn’t actually change their resistance to the current pricing. So we’ve had to get really keen, particularly in discretionary things,” he said.
