Walgreens is closing stores primarily as part of a cost-cutting and business streamlining strategy called the "Footprint Optimization Program." The company plans to close about 1,200 stores nationwide by 2027, starting with 500 closures in the fiscal year 2025. Key reasons for these closures include underperforming stores, high operational costs, store redundancy, and significant financial losses, including a $3 billion net loss reported in late 2024. Competition from online retailers, declining reimbursement rates for prescription drugs, and regulatory pressures such as opioid litigation settlements further strain profitability. The closures aim to focus resources on more profitable locations and improve overall financial health while adapting to changing market demands and reducing the physical store footprint.
Financial and Strategic Drivers
- Reported a $3 billion net loss in Q4 2024, up sharply from $180 million the year before.
- About 25% of Walgreens stores are unprofitable.
- The "Footprint Optimization Program" targets closing stores that are not financially viable or redundant.
- Intended to yield long-term financial and consumer benefits by concentrating on core retail pharmacy operations.
Market and Operational Challenges
- Intense competition from online pharmacies and retail giants.
- Declining payments from insurance and government programs for prescription drugs.
- Rising operational costs and regulatory/legal challenges such as opioid-related settlements.
- Prior expansion efforts under previous leadership led to overextension with many underperforming stores.
Impact and Community Concerns
- Store closures may create pharmacy deserts, making it harder for some customers to access medications.
- Employees face job losses and uncertainty in affected locations.
- Customers reliant on closed stores may need to travel farther or switch to home delivery options.
In summary, Walgreens is closing stores to mitigate financial losses, streamline its operations, and adapt to a challenging pharmacy retail environment marked by competition, regulatory issues, and changing consumer behavior.
