Walgreens is set to shutter several Southern California stores while tackling hefty operational challenges.
Key Takeaways
- Walgreens will permanently close five stores in Southern California by late March.
- Closures come amid regulatory and reimbursement pressures impacting operational costs.
- The initiative is part of a larger “footprint optimization program” over three years.
- 500 locations are expected to close in fiscal 2025.
- Walgreens aims to minimize the impact by collaborating with community stakeholders.
Operational Strains Lead to Store Closures
Walgreens will permanently close five of its retail pharmacy stores in Southern California. Locations affected include Whittier, Los Angeles, Orange, Placentia, and Stanton. These closures are slated to occur by late March as part of the company’s “footprint optimization program” that targets 1,200 location reductions over three years. Regulatory and reimbursement pressures are cited as the causes of these shutdowns, affecting rent, staffing, and supply costs.
Walgreens aims to minimize customer disruptions by engaging with community stakeholders. “When closures are necessary, like those here in California, we will work in partnership with community stakeholders to minimize customer disruptions,” stated Walgreens. The company is attempting to stabilize its U.S. retail pharmacy business as a part of its turnaround strategy.
The Larger Strategy Amid Financial Struggles
The “footprint optimization program” includes closing approximately 500 locations in fiscal 2025. CEO Tim Wentworth emphasized the importance of stabilizing the U.S. retail pharmacy as part of the company’s recovery strategy. Although Walgreens reported $39.46 billion in sales for the first quarter of fiscal 2025, it suffered a net loss of $265 million, or 31 cents per share. “Currently, we see comparable front end sales in our retained store fleet outperforming those stores slated to close this year by approximately 250 basis points and comparable pharmacy scripts by approximately 390 basis points,” mentioned Wentworth.
“Increased regulatory and reimbursement pressures impacting the ability to cover rent, staffing, and supply costs played into the pharmacy store chain’s decision to shutter the locations.” – Walgreens
Approximately 93 employees might lose their jobs due to these closures. However, Walgreens plans to redeploy most of these affected employees to other locations. The closures affect roles like pharmacy technicians, pharmacists, cashiers, customer service associates, and more.
Industry-wide Challenges for Pharmacy Chains
Challenges faced by Walgreens aren’t unique to the company. Drugstore operators, including Walgreens, have been navigating turbulent times since the pandemic. Shifting consumer habits and the financial burdens stemming from opioid settlements have poised difficulties. Recently, Rite Aid also shut down 31 locations in California as part of a bankruptcy restructuring plan. Rising operational costs and industry disruptions are forcing such pharmacy chains to rethink and recalibrate their strategies.
“It is never an easy decision to close a store.” – Marty Maloney
As the industry landscape continues to shift, Walgreens is taking these challenging steps with the hope of a more resilient and efficient future. Despite store closures, Walgreens leadership remains optimistic that their retained locations serve as pivotal components for recovery.
Sources
1. Walgreens closing stores in Whittier, downtown L.A.
2. Walgreens permanently closing some stores in Southern California
