Walgreens announced that it is shutting down a massive number of stores over the next few years. The total numbers somewhere around 1,200. It's kicking that off by closing 500 locations next year alone.
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But why? Well, the pharmacy giant is seeking to slow its bleed of money. Right now, the company has $1 billion in costs, which is a lot! Walgreens revealed a shocking statistic. Of its 8,700 locations across the country, around one in four of the stores are unprofitable.
Walgreens previously announced it was closing stores in June. At the time, it theorized that it could be up to 2,000 locations, but the company eventually settled on 1,200 instead. It's still a very large number and spells tough time for the pharmacy.
So what exactly happened? Well, it got a one for two punch thanks to both high inflation as well as slow consumer spending. Drug reimbursement rates have also been in the tanks for a while now as well.
All of this has affected the stocks. Walgreens is down 65% with near 30-year lows. Tim Wentworth, the company CEO, hopes to revitalize the company. He took over the pharmacy chain's top role last year. He's employed several cost cutting measures such as removing mid-level executives from the company.
Walgreens Closes
This may be his biggest cost-cutting measure yet.
"This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term," Wentworth said in a statement.
We'll see how that affects the company's future. Wentworth explained the rational.
"While the decision to close the store is never an easy one, we feel confident in our ability to continue to serve our customers," Wentworth said, adding that affected employees would be redeployed to other locations.
Walgreens is also entertaining the idea of home delivery for prescription refills for patients not close enough to a location. They're prioritizing closing the ones that are burning money.
"We are prioritizing closing locations that are cash flow negative, underperforming stores where we own the locations, and ones where the lease expirations are coming due in the next few years," said CFO Manmohan Mahajan.
