Walgreens said Tuesday it plans to close 1,200 stores over the next three years as it seeks to further downsize its footprint amid flagging sales and changing consumer behavior.
The pharmacy chain said 500 of the closings would occur over the next 12 months. It estimates a quarter of its 8,700 stores in the U.S. are unprofitable.
Walgreens announced the closures as part of its fiscal fourth-quarter and full-year earnings, which beat Wall Street’s expectations. In a statement, CEO Tim Wentworth acknowledged the company was in the midst of a “turnaround” that would “take time.”
“We are confident it will yield significant financial and consumer benefits over the long term,” Wentworth said.
In June, Walgreens said it planned to close a “significant” number of its underperforming stores by 2027. Tuesday’s announcement appears to be the company’s first exact estimate of how many locations it will shutter.
Both Walgreens and rival CVS are facing a difficult operating environment, fighting to be profitable as consumers shift their habits.
In 2021, CVS said it would close about 900 stores, or about 10% of its U.S. locations, from 2022 to 2024. Rite Aid recently emerged from bankruptcy and will operate as a privately owned company.
Pharmacy chains have been squeezed in part by changes to the prescription drug market, including lower reimbursements from pharmacy benefit managers (PBMs), the third-party companies that manage prescription drug benefits for health insurance companies.
PBMs have been recently accused of inflating drug costs and are the target of multiple legislative and regulatory reforms and actions.
The end result has been a greater number of “pharmacy deserts” across the U.S.
“The retail pharmacy industry is going through a period of soul-searching, trying to understand the best model to reach the consumer,” Neil Saunders, GlobalData’s retail managing director, told CNBC in August.