Walgreens plans to close 1,200 stores in the next three years

Walgreens Boots Alliance has announced plans to shutter 1,200 stores over the next three years, with 500 of those closures slated for 2025. This decision, revealed during an earnings call by CEO Tim Wentworth, is part of the company’s efforts to stabilize its retail pharmacy operations. Facing rising costs and pressures on profit margins, Walgreens is making tough calls to improve cash flow and focus on profitability, with 6,000 of its 8,700 U.S. stores deemed successful. Unfortunately, for the underperforming locations, the ax will fall.

The move to close stores is just one part of Walgreens’ larger strategy to weather a challenging retail environment. The company plans to lean into its strengths as a retail pharmacy, including expanding its range of private-label brands in health and wellness—an area CEO Wentworth specifically mentioned as ripe for growth. Walgreens introduced over 300 of these private-label products this year, with another 300-plus expected in 2025, riding a wave of consumer demand for more affordable options amidst inflation.

This pivot towards private brands reflects a broader trend across the retail industry, where national brands are being swapped out in favor of in-house alternatives. The results so far are promising, with Walgreens seeing improved gross margins due to this shift, though ongoing struggles in nonessential categories continue to weigh down performance. Walgreens U.S. retail sales dipped 1.7% this quarter, largely driven by weaker demand in nonessential items, but its focus on health-related products is paying off with steady improvements in margins.

Despite the store closures and a $3 billion loss in the fourth quarter—largely stemming from opioid liabilities and investments in China—there’s a silver lining. Walgreens managed to beat Wall Street expectations, with adjusted earnings topping projections and quarterly revenue surging past forecasts by $2 billion. That said, the road ahead remains steep as the company navigates its way out of an $8.6 billion net loss this year, a staggering 180% increase from the previous year.

The company’s leadership remains confident that these changes will ultimately benefit both Walgreens and its consumers, though it’s clear the pharmacy giant is undergoing a significant rebirth. As Walgreens doubles down on its retail pharmacy roots and adapts to consumer preferences, it will be fascinating to see how its transformation pans out……..[read more]

Rising Dough

As companies like Walgreens turn to private-label products to improve their bottom line, how do you think this shift impacts consumer choices and brand loyalty? What role do you believe pricing and product availability play in a consumer’s decision-making process, especially during tough economic times?

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