Thousands of Store Closures 'Imminent' at Walgreens

A worse-than-expected consumer environment and soft performances at 25% of Walgreens stores have spurred the company to lower its outlook and close physical locations.

Walgreens Boots Alliance (WBA) has some of its own health issues to attend to, in terms of its business well-being. The retailer lowered its earnings guidance for the rest of the fiscal year and announced plans to shutter potentially thousands of stores within its core business.

Some of those closures could some soon, as CEO Tim Wentworth shared in a June 27 earnings webcast. “As a convenient destination for millions of consumers and driving $27 billion in retail sales, the store and its digital channels are central to our strategy and customer experience. But the consumer has evolved, demographics and preferences have shifted and we need to reposition and operate our stores accordingly,” he explained.

Wentworth continued, “Currently, 75% of our U.S. stores contribute roughly 100% of our segment AOI (adjusted operating income). For the remaining 25% of the stores in our network which are not currently contributing to our long-term strategy, changes are imminent. To start, we are finalizing a multi-factor store footprint optimization program, which we expect will include the closure of a significant portion of these underperforming stores over the next three years. For the remaining portion of this cohort, we are taking action to improve profitability.”

It was a bumpy third quarter that led to some hard decisions as the organization continues its ongoing strategic review. Although third quarter sales increased 2.6% on a year-over-year (YoY) basis, adjusted operating income tumbled 36.3%, reflecting lower sale-leaseback gains and softer performance in the U.S. retail and pharmacy segments.

Retail sales slid 4% during the quarter versus a year ago, and comps dipped 2.3% during that time frame. Higher shrink levels contributed to the losses, WBA reported.

That said, there were some bright spots, including positive growth in U.S. healthcare led by the VillageMD and Shields businesses. WBA emphasized that it is working to align the U.S. pharmacy and healthcare organizations for improved go-to-market capabilities.

Walgreens Boots Alliance Inc. is an integrated health care, pharmacy and retail leader serving millions of customers and patients every day. It has approximately 12,500 locations across the United States, Europe and Latin America and employs more than 315,000 people. The Deerfield, Ill.-based Walgreens brand operates nearly 9,000 retail locations across the United States, Puerto Rico and the U.S. Virgin Islands. It’s No. 6 on The PG 100, Progressive Grocer’s 2024 list of the top food and consumables retailers in North America.