Walgreens, one of America's largest pharmacy chains announced that they plan to close numerous stores across the U.S. as it embarks on a "significant multiyear footprint optimization program to close certain underperforming" locations.
The company didn't say exactly how many of its nearly 8,600 locations it plans to close or which ones. They only stated that they plan to close certain underperforming locations.
Walgreens also adjusted its earnings expectations for the rest of 2024 amid "challenging pharmacy industry trends and a worse-than-expected U.S. consumer environment."
CEO Tim Wentworth said, "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. Our results and outlook reflect these headwinds, despite solid performance in both our International and U.S. Healthcare segments." "Informed by our strategic review, we are focused on improving our core business: retail pharmacy, which is central to the future of healthcare. 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.”
Walgreens experienced a 48% decrease in operating income in the U.S. for the three months ending on May 31, compared to the same period in 2023. Over the nine months leading up to May 31, Walgreens saw a 38% drop in operating income compared to the previous year.
Walgreens blamed the drop in income on "lower sale and leaseback gains, a challenging retail environment and reimbursement pressure, net of procurement savings, partly offset by cost savings initiatives."
This year, Walgreens has reduced prices on numerous products, staying competitive with discounts offered by other major retail chains such as Target and McDonald's. Recently, Walgreens unveiled discounts on 1,300 products, attracting customers with lower prices on a variety of items, from miniature pretzels and coolers to gummy vitamins.
In May, Walgreens' top competitor CVS said that operating income from its stores was down 34% in the first three months of 2024 compared to 2023.
At the same time, Rite Aid, a major Midwest pharmacy chain, announced the closure of locations in Ohio and Michigan, along with the shutdown of a distribution center based in Michigan.
The company, based in Deerfield, Illinois employs about 240,000 people nationwide.
In 2021, the company raised the minimum wage for staff to $15 per hour.
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