After years of finger-pointing at San Francisco over a small handful of local Walgreens closures, the company now admits it just has way too many stores, and will be closing 1,200 more of them across the US.
The closure of nine San Francisco Walgreens stores since 2021 brought a national media pile-on saying the city was a hotbed of “organized retail crime.” But over time, Walgreens admitted that “maybe we cried too much” about shoplifting, that their security was ineffective, and that the chain had simply expanded to too many store locations that were cannibalizing each others’ business.
And that seems to be validated by Tuesday morning’s news that Walgreens is closing 1,200 stores nationwide, as CBS News MoneyWatch reports.
Wonder how many locales will have no pharmacy because Walgreens aggressive expansion drove all the mom and pop pharmacies out of business. https://t.co/J06TcrfKYy
— Cake or Death (@Johngcole) October 15, 2024
The announcement came on a Tuesday morning investor call from Walgreens’ parent company Walgreens Boots Alliance. They said they will close 500 stores in the next fiscal year (which is actually next year), and 1,200 stores total over the next three years. The Associated Press reports Walgreens lost $3 billion this quarter, though ironically, the AP describes those losses as “better-than-expected quarterly results.”
The 1,200 stores represent 14% of all Walgreens locations in the US. The company has not yet detailed which locations will close.
BREAKING: Consumers Outraged Over Closure Of Walgreens Stores They Rarely Visited pic.twitter.com/ITan72VuER
— ADWEAK (@adweak) October 15, 2024
People are having a few laughs over this, but Walgreens stock has jumped by nearly 12% on the news. So that’s great for shareholders, until you consider that Walgreens stock has plummeted by 84% since 2019.
"The closure of so many stores is emblematic of a company that is in trouble and is trying to course correct," GlobalData managing director Neil Saunders told MoneyWatch. “Walgreens spent years building its business through acquisitions and completely neglected the fundamentals of its stores and its retail operations.”
For those that blame the closure of Walgreens stores on retail theft, you have to deal with the fact that Walgreens is primarily a pharmacy, not a retail store. In each of the last 3 fiscal years, WBA reported that 75% of its US sales come from pharmacy operations. pic.twitter.com/DILKP5etvR
— Owen Barcala (@obarcala) October 15, 2024
And the fundamentals of Walgreens are not the shampoo bottles, dental floss, and convenience store items you see kept behind lock and key in these parts. Most of Walgreens’ revenue comes from their pharmacies, which are performing more poorly than during the pandemic and pre-pandemic. State and federal drug reimbursement rates have lowered, and the guaranteed MediCare of the pandemic has expired.
As evidence of this broader contraction in the brick-and-mortar pharmacy market, CVS is also in dire straits and in the process of closing 900 stores, and Rite-Aid just went through bankruptcy proceedings.
Walgreens has had other challenges too. The company has had to pay massive settlements for overprescribing opioids and Theranos consumer fraud cases.
But maybe it's good that San Francisco had its Walgreens closures before the rest of the country. Because we already have empty Walgreens spaces turning into new, locally owned businesses that may provide more community value.
Image: Exterior facade of Walgreens with store signage, San Francisco, California, August 20, 2024. (Photo by Smith Collection/Gado/Getty Images)
