Walgreens to Close 1,200 Stores

Walgreens is set to close over 1,200 stores as its parent company, Walgreens Boots Alliance, seeks to improve performance amid declining prescription reimbursements and rising retail competition. During the company’s fourth-quarter earnings call, Walgreens Boots executives announced plans to accelerate store closures and are considering shutting down an additional 800 locations.

Although Walgreens did not specify which stores will be closed, executive VP and CFO Manmohan Mahajan said the company will focus on cashflow-negative and underperforming locations, particularly where leases are set to expire in the next few years. He added that the closures, along with the sale of company-owned stores, are expected to generate $100 million in adjusted operating income.

“We have 8,000 stores (in the U.S.), of which approximately 6,000 are profitable,” Walgreens Boots Alliance CEO Tim Wentworth said during the call. “While the decision to close a store is never easy, we are confident in our ability to continue serving our customers. We plan to follow our historic practice of redeploying the majority of the workforce from the stores we close.”

Walgreens reported a net loss of $3 billion for its fiscal fourth quarter, a significant jump from the $180 million figure reported a year ago. The company attributed the losses to higher operating expenses, a $2.3 billion non-cash charge for a valuation allowance on deferred taxes, and a $240 million non-cash impairment charge due to investment losses in China.

The decision to close 1,200 of Walgreens’ 12,500 locations in the U.S., Europe, and Latin America represents a nearly 10% reduction in its global footprint. If the company proceeds with evaluating an additional 800 store closures, the total reduction could reach up to 16%. Walgreens did not provide further details on how the closures will impact its workforce of approximately 330,000 employees.

Walgreens is not alone in facing these challenges. Earlier this week, GlobeSt.com reported that 7-Eleven’s parent company plans to close 444 locations in North America, about 3% of its portfolio, as part of a cost-cutting strategy.

According to a recent report from Business Insider, 13 major retail brands have announced plans to close a total of 2,045 stores. The report also noted that up to 45,000 store closures could occur over the next five years.