Walgreens Store Closures

Walgreens has announced plans to shut down 1,200 stores across the United States by 2028, with 500 of those closures expected in 2025. This decision, affecting nearly 14% of its locations, has been linked to low reimbursement rates for medications and a decline in consumer spending.

This move reflects a shift in Walgreens’ overall business strategy, as the company has faced ongoing financial challenges. Earnings for 2024 have dropped by 27.9%, with a staggering 40.8% decline noted in the fourth quarter alone.

The stock performance of Walgreens has been underwhelming, with a year-to-date decline exceeding 55% and a three-year return falling by 73.78%. Walgreens Boots Alliance Inc., the parent company of Walgreens, is now focusing on reducing operational costs by closing underperforming stores, particularly those approaching the end of their leases, experiencing high theft rates, or those it owns outright. This strategy aims to generate capital and alleviate some of the company’s debt burdens.

These closures may lead to the emergence of “pharmacy deserts” in rural and low-income areas, where existing pharmacies are already challenged by inadequate payments from pharmacy benefit managers—third-party firms that manage prescription drug benefits.

In a recent interview with CNBC, Brent Eberle, Senior Vice President and Chief Pharmacy Officer at Navitus Health Solutions, shared a hopeful perspective. “This creates opportunities for entrepreneurs to establish independent pharmacies to serve these underserved areas,” Eberle noted. He believes that a reduction in market share for large corporations like Walgreens could foster increased opportunities for small business development.

Walgreens is not alone in facing difficulties among retail pharmacies. CVS Pharmacy Inc. plans to close 300 locations by the end of this year, with potential strikes at seven sites in California. Despite reporting improved earnings for the 2023 fiscal year and the first quarter of 2024, CVS has seen a stock decline of 21.26% year-to-date, with a three-year return of -23.10%.

CVS’s recovery, following a significant drop in earnings in 2017, has involved similar store closures and a strategic focus on renegotiating drug reimbursements. Meanwhile, Rite Aid Corp. has filed for bankruptcy protection to address lawsuits linked to the opioid crisis and manage a debt load nearing $4 billion.

During Walgreens’ Q3 earnings call, CEO Tim Wentworth outlined the company’s future direction. “In a year, you will see a company that is more focused, likely with fewer offerings than we have now, but one that is committed to areas where we foresee substantial growth.”

At Mediserv Pharmacy, located in the Bronx, New York, we are dedicated to serving our community with accessible and reliable pharmaceutical services. As larger chains like Walgreens and CVS undergo significant changes, we remain committed to providing personalized care and support to our customers, ensuring that everyone has access to the medications they need. Visit us for all your pharmacy needs, where community health comes first.