You could be losing your neighborhood drug store.
Walgreens has announced that it has plans to close a significant number of its roughly 8,600 stores across the U.S. CEO Tim Wentworth said in a recent earnings call that a quarter of locations are losing money, and the plan is to have many of these stores close over the next three years.
“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.
Struggling to make a profit
According to Wentworth, the biggest reason for store closures is the company’s recent struggle with profitability. He reported that all of its profits come from just 75% of locations – which is why a quarter of locations are now under scrutiny.
In years past, pharmacies made a significant profit from prescription drug reimbursements. However, as insurance companies have gotten stricter with what they’re willing to reimburse, pharmacies have taken a hit financially.
Despite the pharmacy’s recent efforts to slash prices on over 1,000 items, the company ultimately believes this will further hurt profits. Retail sales are already down 4% this quarter, and though total sales figures were up last quarter, inflation makes it difficult to turn a profit.
Additionally, this store closing announcement has led Walgreens’ stock to plummet 25%. Shares are now estimated to be between $2.80 and $2.95 – the lowest it’s been in decades.
Despite these struggles, Wentworth remains positive about the future of the company.
“Informed by our strategic review, we are focused on improving our core business: retail pharmacy, which is central to the future of health care,” Wentworth said. “We are addressing critical issues with urgency and working to unlock opportunities for growth.
“Many of these actions will take time, but I am confident that we have the right team and the right strategy to lead a business turnaround for the Walgreens that our customers and patients need.”