Walgreens plans to close a “significant portion” of underperforming stores and lower its stake in primary care provider VillageMD, a shift away from the pharmacy chain’s previous strategy to transform into a “consumer-centric” healthcare company.
While executives didn’t specify an exact number of stores it would shutter, Walgreens CEO Tim Wentworth said during the company’s Q3 2024 earnings call on June 27 that it could close up to 25% of the chain’s roughly 8,600 stores over the next three years.
The decision to close the stores—which Wentworth said are “underperforming”—comes after the company’s earnings fell short of analysts’ expectations: Walgreens reported a $13.1 billion operating loss for the first nine months of FY2024 and lowered its 2024 profit forecast from $3.20–$3.35 per share to $2.80–$2.95 per share.
“We are at a point where the current pharmacy model is not sustainable, and the challenges in our operating environment require we approach the market differently,” Wentworth said on the earnings call.
A challenging environment
By February of this year, Walgreens had already closed 625 of its stores, the New York Times reported, and the company later announced it would shut 160 VillageMD primary care clinics after reporting a nearly $6 billion net loss in Q2 2024 earnings.
Wentworth told the Wall Street Journal that the company is also set to lower its stake in VillageMD, meaning Walgreens would no longer be the majority owner. Walgreens spent $5.2 billion in 2021 to buy a majority stake in the primary care company as part of an effort to be seen as more than a pharmacy chain, Healthcare Brew previously reported.
Walgreens continues to “believe in the future” of VillageMD and plans to “remain an investor and partner,” Wentworth said in the earnings call.
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It’s unclear how many Walgreens employees the store closures would affect, though he told the Journal that the store closures would not “result in a meaningful loss of jobs.”
Walgreens spokesperson Fraser Engerman told Healthcare Brew the company “will work to minimize customer disruptions. Importantly and as we have done in the past, we intend to redeploy the vast majority of our team members in those stores that we close."
Following the earnings call, Walgreens shares fell 22%, and the company’s earnings are now down 54% for the year, the Times reported.
The bigger picture: Over 40% of US counties are pharmacy deserts, and closing a large number of stores could potentially put more areas at risk of losing convenient access to pharmacy services, according to research from drug marketplace GoodRx.
Wentworth told the Journal the company is looking to close Walgreens locations that are in close proximity to each other to ensure it could still “efficiently serve consumers with fewer locations in those areas.”
Walgreens also isn’t the only retail pharmacy chain that’s struggling. Rite Aid filed for bankruptcy in October 2023 amid mounting debt, falling revenue, and multimillion-dollar opioid settlements. And CVS executives said in 2021 that the company would close 900 stores over a three-year period; roughly 300 locations have been shuttered so far in 2024, according to the Washington Post.
Looking ahead: Walgreens aims to focus on its retail pharmacy business, which is “central to the future of healthcare,” Wentworth said in a statement.