If you like looking for drug store deals, you may have to look a lot harder soon. Walgreens has become the latest drug store chain to announce it’s shutting down a significant number of stores across the country.
In what it euphemistically described as an “expanded footprint optimization program,” Walgreens said yesterday it planned to close 1,200 of its more than 8,000 stores over the next three years, with an additional 800 locations coming under renewed scrutiny, with no guarantee they will survive, either.
“The decision to close a store is never an easy one,” CEO Tim Wentworth told investors yesterday. But “executing on this program will realign our footprint to a healthier store base that we believe will enable us to respond more dynamically to shifts in consumer behavior and buying preferences.”
The company did not divulge the locations of any of the closing stores. But the 1,200 to be shuttered, as well as the 800 that are on the bubble, have all been identified as being unprofitable. Jettisoning the company’s worst performers will “enable us to fund the investments we plan to make in higher-performing stores as we look to improve our customers’ in-store experience,” Chief Financial Officer Manmohan Mahajan said.
Walgreens’ announcement follows similar “footprint optimization” efforts from its main drug store rivals. A few years ago, CVS announced plans to close 900 stores. Additional Rite Aid store closures soon followed, and the troubled company closed hundreds more after filing for bankruptcy last year.
It may be that, with a drug store chain or two or three seemingly around every corner, we have finally reached peak drug store saturation, and it was time for a course correction. Some question whether the chains were too focused on expansion and ubiquity rather than maintaining well-run stores people actually wanted to visit. Back in 2017, Walgreens confidently acquired nearly 2,000 stores from Rite Aid – a decision it may now be regretting.
“Walgreens spent years building its business through acquisitions and neglected the fundamentals of its stores and its retail operations,” retail analyst Neil Saunders, Managing Director of GlobalData Retail, wrote. “Cutting out the dead wood will help the company strengthen its financials over time, but it is a huge admission of failure.”
Key to the company’s future success will be ensuring that its remaining stores perform well.
“We continue to refine our pricing and promotion strategy” in order to adapt to shoppers’ “value-seeking behavior,” Mahajan said. “We must be relevant to today’s consumer,” Wentworth added. “To this end, we are reevaluating our merchandising strategy to offer a refreshed assortment of products, including our own brands. By being more selective with national brands and expanding our own brands, we are sharpening our focus as a destination for categories for which we believe we are uniquely positioned to lead, like health and wellness.”
So as we wait to see which locations are actually marked for closure, keep a close eye on your local Walgreens. It could soon feature new brands, new deals and an upgraded look – if it doesn’t start posting going-out-of-business signs instead.
Image source: Walgreens
