Walgreens Boots Alliance is considering the closure of hundreds of underperforming stores as the company faces challenges in its U.S. retail pharmacy business. The company’s prescription growth has not rebounded to pre-pandemic levels, and consumer spending has slowed. Millions of Americans who lost Medicaid health insurance during the pandemic have yet to regain coverage, impacting their ability to pay for prescriptions. Walgreens’ top executive has indicated that these challenges will persist into the next year, and a turnaround of the business could take several quarters.
Healthcare analyst Ann Hynes noted that Walgreens’ front-store customers are price-sensitive and selective in their purchases due to an inflationary environment. Prescription volume growth is below pre-pandemic levels, partly due to Medicaid redeterminations, increasing regulatory pressures, and shifts in branded product mixes. These factors have reduced Walgreens’ pricing ability and contributed to the challenging pharmacy environment. To address these issues, Walgreens is finalizing a footprint optimization program to close underperforming stores, representing 25% of the company’s more than 8,600 U.S. locations.
Walgreens CEO Tim Wentworth emphasized the importance of repositioning and operating stores according to evolving customer demographics and preferences. The store closures are expected to occur over the next three years, with the goal of stabilizing the retail pharmacy segment within a year. Wentworth acknowledged that the turnaround process will take time, stating that it will be a matter of quarters rather than months or multiple years. The company aims to demonstrate to consumers that they deserve their preference through stabilization and growth in the retail pharmacy business.
Wentworth believes that closing stores is a necessary step in an industry with excess capacity. By reducing capacity, Walgreens can optimize labor usage and effectively serve payers with the remaining footprint. The company’s focus on serving customers and adapting to changing preferences aligns with its strategy to remain a convenient destination for millions of consumers. While the closure of stores may impact the industry and labor force, Walgreens sees it as a positive move that will position them for success in the future. Overall, the company is optimistic about its ability to navigate the challenges facing the retail pharmacy business and is committed to evolving to meet the needs of its customers.
