Walgreens to close 1,200 drugstores, in ‘turnaround’ after $3B loss
The pharmacy chain plans to negotiate better reimbursement terms with health insurers, while considering selling its VillageMD clinic business, said CEO Tim Wentworth.
In August, CVS announced it closed 850 stores nationwide, and now Walgreens has announced today that it will close about 1,200 drugstore locations over the next three years, as new CEO Tim Wentworth aims to turn around the struggling drugstore chain hit by sluggish sales and low drug reimbursement rates that contributed to a $3 billion quarterly loss.
The Chicago-based pharmacy chain said Tuesday that about 500 store closures will come in the current fiscal year, which began Sept. 1, and should immediately support adjusted earnings and free cash flow. Walgreens didn’t say where the store closings would take place.
Walgreens, which operates about 8,500 stores in the United States and a few thousand overseas, will close unprofitable stores and negotiate better reimbursement terms with insurers. All of the stores that will be closed are in the U.S.
Walgreens Boots Alliance leaders said in late June that they were finalizing a turnaround plan for its U.S. business, and that push could result in the closing of hundreds of underperforming stores.
The plan announced Tuesday includes the closing of 300 stores that had been approved under a previous cost-cutting plan.
In August, Walgreens said it was reviewing its health care business and might sell its VillageMD clinic business, after announcing plans earlier this year to close more than 160 clinics. Walgreens purchased VillageMD for $6 billion under former CEO Rosalind Brewer.
Related: CVS layoffs will include more than 400 employees at Aetna
Wentworth said in a statement that fiscal 2025, which began last month, will be an important “rebasing year” for the drugstore chain. “In fiscal 2025, we are focusing on stabilizing the retail pharmacy by optimizing our footprint, controlling operating costs, improving cash flow, and continuing to address reimbursement models to support dispensing margins and preserve patient access for the future …, ” said Wentworth. “ “This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term.”
Rite Aid, another major pharmacy chain, emerged from bankruptcy organization earlier this year, after narrowing its store count to 1,300 locations.