Walgreens reveals a significant change in its strategy by closing several Southern California pharmacies as part of its nationwide plans.
Key Insights
- Walgreens plans to close five retail pharmacy stores in Southern California.
- Closures attributed to increased regulatory and reimbursement pressures.
- Walgreens aims to minimize customer disruptions through community partnerships.
- Part of a broader plan to shut 1,200 locations over three years.
Pharmacy Closures in Southern California
Walgreens plans to permanently close five retail pharmacy stores by late March in Southern California. The targeted locations include Whittier, Los Angeles, Orange, Placentia, and Stanton. These closures result from daunting regulatory and reimbursement pressures that have made it challenging to cover rent, staffing, and supply costs. This move aligns with Walgreens’ broader initiative to streamline operations and stabilize the U.S. retail pharmacy business as part of a three-year footprint optimization program.
Walgreens has a broader goal of closing around 1,200 stores, with plans to shutter approximately 500 locations in fiscal 2025. The company, however, emphasizes efforts to work with community stakeholders to minimize disruptions. According to a Walgreens representative, “When closures are necessary, like those here in California, we will work in partnership with community stakeholders to minimize customer disruptions.” A positive outcome from these closures is that retained stores reportedly outperform those closing.
Strategies and Challenges
The closures, already influencing at least 93 employees across various roles, reflect broader market trends and challenges impacting major pharmacy operators. Walgreens and other companies like Rite Aid have struggled with changes in consumer habits since the pandemic and the substantial financial toll of opioid settlements. Rite Aid recently closed 31 stores in California, stemming from a bankruptcy restructuring plan.
“It is never an easy decision to close a store,” Marty Maloney commented on the difficult decisions being made by the corporation.
Despite these challenges, Walgreens aims to carry its remaining locations to success. The strategy involves consolidating resources and redirecting efforts to ensure better service and stability. CEO Tim Wentworth highlighted that the closing stores are significantly underperforming compared to those that are remaining operational.
Future Outlook
The recent developments come amid Walgreens Boots Alliance reporting $39.46 billion in sales for the first quarter of fiscal 2025. However, the company experienced a net loss of $265 million, or 31 cents per share. To manage these losses effectively, the company acknowledges the importance of stabilizing its U.S. retail pharmacy business with strategic adjustments. The ability to redeploy most of the affected employees to other stores exemplifies an effort to mitigate the impact of closures on staff. Meanwhile, working closely with community leaders, Walgreens aims to balance efficiency with its commitment to local communities.
“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
The commitment to community and strategic adjustments in how the company operates are essential measures as Walgreens navigates this phase. By optimizing its footprint, Walgreens could emerge streamlined and more resilient to market challenges.
Sources
1. Walgreens closing stores in Whittier, downtown L.A.
2. Walgreens permanently closing some stores in Southern California
