**Walgreens to Close Stores Amid Struggles and High Prices Says CEO**
Walgreens, one of the largest pharmacy chains in the United States, is set to close a significant number of its approximately 8,600 locations as part of a strategic move to address ongoing financial struggles and high operational costs. This decision comes amid a challenging period for the retail pharmacy industry, marked by declining profits, increased competition, and the lingering effects of the COVID-19 pandemic.
**A Struggling Industry**
The retail pharmacy sector has been grappling with numerous challenges over the past few years. The majority of drugstores’ revenue comes from filling prescriptions, but profits from this segment have been declining due to lower reimbursement rates for prescription drugs. Additionally, the front end of drugstores, where they sell snacks and household staples, faces intense competition from larger retailers like Amazon, Walmart, and Dollar General.
The COVID-19 pandemic provided a temporary boost to pharmacies due to the demand for vaccines. However, this surge was short-lived, and fewer consumers are now visiting stores to shop. Prescription volumes have also fallen as people undergo fewer elective procedures.
**Walgreens’ Financial Woes**
Walgreens has not been immune to these industry-wide issues. The company recently reported a near $6 billion net loss for the second quarter, partly due to the decreasing value of its VillageMD acquisition. CEO Tim Wentworth acknowledged the difficult operating environment, citing persistent pressures on U.S. consumers and recent marketplace dynamics that have eroded pharmacy margins.
In response to these challenges, Walgreens announced plans for “significant” closures of underperforming stores across the country. Wentworth indicated that the closures would focus on locations that are not profitable, too close to each other, or struggling with theft. This move is part of a multiyear optimization program aimed at resetting the company’s business and improving its financial health.
**Impact on Communities**
The closure of Walgreens stores will undoubtedly have a significant impact on the communities they serve. Pharmacies play a crucial role in providing access to medications and essential health services, especially in low-income neighborhoods. The loss of a retail pharmacy can leave a void, particularly for households that rely on public insurance with lower reimbursement rates.
Research has shown that pharmacy closures can lead to health risks, such as older adults failing to take their medication. A study published in the Journal of the American Medical Association found that pharmacies at greatest risk for closures are those with a large customer base on public insurance and independent pharmacies.
**Industry-Wide Trends**
Walgreens is not the only major pharmacy chain facing these challenges. CVS, the largest U.S. chain, has also been closing stores in recent years. Between 2018 and 2020, CVS closed 244 stores, and in 2021, it announced plans to close 900 more by 2024. Rite Aid, the third-largest standalone pharmacy chain, filed for bankruptcy in October and will reportedly close roughly 400 to 500 of its approximately 2,200 stores.
These closures reflect long-term struggles in the retail pharmacy industry. Drugstores have been trying to pivot into the more lucrative healthcare industry by becoming primary care providers. For example, CVS acquired health insurer Aetna, and Walgreens took a majority stake in primary care network VillageMD. However, this strategy requires fewer brick-and-mortar retail stores.
**Walgreens’ Future**
As Walgreens navigates these industry struggles, the company is also making efforts to attract inflation-weary shoppers. In May, Walgreens slashed prices on more than 1,000 items, following rivals in an effort to lure back customers turned off by high prices. The company has also been reducing prices since last October as part of its “Summer of Savings” initiative.
Despite these efforts, Walgreens’ retail sales fell 4% for the quarter, reflecting the broader challenges facing the industry. The cost-of-living crisis has exacerbated front-of-store struggles, with customers curtailing the volume of products they buy and shopping around more for the best deals and bargains.
**Conclusion**
The decision by Walgreens to close a substantial number of its stores underscores the significant challenges facing the retail pharmacy industry. As the company works to reset its business and improve its financial health, the impact on communities and the broader industry remains to be seen. With major players like CVS and Rite Aid also closing stores, the future of retail pharmacies in the U.S. is uncertain.
Source: The Seattle Times, CNN, Forbes, Bloomberg
