Walgreens opts for store closures: A response to economic headwinds

Walgreens, one of the largest pharmacy chains in the U.S., announces the closure of approximately 1,200 stores as it grapples with declining consumer behavior. The planned closures are to occur within the next three years, beginning in fiscal year 2025 with the closure of 500 stores. This announcement was made as part of the company's current earnings report, which for the first time disclosed the exact number of affected locations. Under the leadership of CEO Tim Wentworth, Walgreens is pursuing a long-term cost-saving program. Wentworth, who only took over leadership last year, emphasized the company's strategic reorientation towards optimizing its core business in the pharmacy sector. He believes that this turnaround requires some time, but it is expected to bring significant financial and customer-related benefits in the long term. Although it is currently unclear which of the more than 8,700 U.S. locations will be affected by the closures, the planned closures account for about 13% of the stores. These measures are taking place in an economically challenging environment, even though Walgreens achieved its goal of reducing costs by one billion USD last year. At the same time, the chain reported a loss of three billion USD in the last quarter, mainly due to impairments related to healthcare provider CareCentrix. Despite these challenges, retail sales in the pharmacy sector increased by 6.5% to 29.5 billion USD in the last quarter. The announcement of the closures comes at a time when Walgreens and other pharmacy chains like CVS and Rite Aid, facing increasing competition from Amazon and declining reimbursement rates, are making structural adjustments. CVS has laid off thousands of employees and Rite Aid, which filed for bankruptcy last year, has already closed numerous stores. Numerous companies outside the pharmacy sector are also experiencing similar challenges in the face of rising prices and stagnant consumer spending.