January 1, Walgreens to Shut Down 450 Stores Amid Economic Uncertainties

Walgreens Boots Alliance, one of the largest pharmacy chains in the United States, has decided to shut down 450 stores despite reporting an 8.6% increase in their third-quarter sales for the fiscal year 2023.

The seemingly paradoxical decision comes amidst an unsettling economic climate and decreasing demand for COVID-related services.

On June 27, Walgreens reported that their third-quarter sales for 2023 hit $35.4 billion, an encouraging surge from the previous year.

The first nine months of the fiscal year saw a 3.4% increase in sales, amounting to a whopping $103.7 billion. These numbers suggest strong performance in the company’s U.S. retail and pharmacy sectors.

The report showed a 9.8% boost in nationwide comparable pharmacy sales compared to the third quarter of fiscal year 2022. Comparable retail sales also rose by 0.2%, largely propelled by robust results in the grocery & household and beauty categories.

However, these seemingly positive figures conceal a more complex reality.

Despite the sales increase, Walgreens fell short of its estimates for the third quarter.

The company has also had to cut back its full-year earnings outlook. It cited “challenging consumer and macroeconomic conditions, and lower COVID-19 vaccine and testing volumes” as reasons for the modification.

Consequently, Walgreens’ shares took a dive, falling by 9% to $28.64, their lowest point in more than 11 years.

Walgreens CEO Rosalind Brewer said in a statement, “Consumers continue to appreciate the value, convenience, and range of services provided by Walgreens and Boots.

“However, significantly lower demand for COVID-related services, a more cautious and value-driven consumer, and a recently weaker respiratory season created margin pressures in the quarter.”

Amid these economic uncertainties, Walgreens has decided to make drastic adjustments, including closing 450 stores.

On a June 27 earnings call, CFO James Kehoe revealed that 300 locations in the U.K. and 150 in the U.S. would be shut down.

While the company has not divulged specifics regarding which stores will be affected or when the closures will commence, a spokesperson confirmed plans to close the 150 U.S. locations by the end of the next fiscal year, Aug. 31, 2024.

This decision comes as a considerable blow to Walgreens’ brick-and-mortar presence, as the company currently operates around 9,000 stores across the U.S.

Bottom Line

Walgreens’ decision to close stores despite rising sales underscores the challenging and unpredictable economic climate businesses are facing.

As the retail landscape continues to evolve in response to economic forces and consumer behavior, traditional retailers like Walgreens are forced to adapt, often in ways that might seem contradictory on the surface.

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