Major Pharmacy Closes Hundreds of Stores as Profits Plummet

By: Stephanie Bontorin | Published: Jun 28, 2024

In the past few decades, specialty stores have become less popular and big box stores that offer several different departments are gaining more reaction.

Customers no longer value stopping by several stores when they could order everything online from a single retailer or stop by a single shop. This trend has caused several specialty stores to close down.

The Retail Landscape Has Changed Forever

Due to the modernization of stores and shopping, retail has struggled to keep up with giants like Amazon and Walmart.

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Smaller grocery stores, retail operations and drug stores have gone out of business. Instead of leaving a gap in the market for new brands to move in, customers seem to be leaning even more heavily on big box stores.

Post-Covid Issues Are Still Affecting Stores

Small shops have also faced issues like theft and employee retention, which grew out of the same problems present during the COVID-19 pandemic.

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Many struggling retailers have been forced to make difficult cuts to stay afloat.

Walgreens Feels the Squeeze

Walgreens, the national retailer of small pharmacies, has struggled to keep up with the changing landscape.

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Executives for the brand say that they have been particularly hard hit by retail theft and organized retail crime. Many storefronts choose to lock up essential items and commonly stolen products; however, this practice makes it more difficult for customers to shop and turns them off from walking into a store.

Rite Aid Filed For Bankruptcy Last Year

The national chain of pharmacies owned by Rite Aid was forced to file for Chapter 11 bankruptcy In October 2023.

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The exterior of a large pharmacy with two cars parked in front

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The brand shuttered hundreds of stores nationwide and continues to face stiff competition with CVS and Walgreens. Unfortunately, both brands face the same issues to retain customers.

Walgreens Also Suffered From Bad Business Dealings

In addition to the rise of theft in stores, Walgreens also faced significant losses from poor business dealings.

The exterior of a beige Walgreens location with two matching Walgreens signs

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The company began a partnership with Village MD, a standalone clinic attached to hundreds of Walgreens locations. Unfortunately, the partnership forced the pharmacy to take a $6 billion loss as the primary care clinics went under.

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More Store Closures Expected

Aside from the 15o locations closed down due to the poor venture with Village MD, the company will also be shutting down independent locations.

The exterior of a large Walgreens location with several cars in the parking lot

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On a Q3 earnings call, CEO Tim Wentworth told analysts, “We’re at the point where the current pharmacy model is not sustainable and the challenges in our operating environment require we approach the market differently. We are in active discussions … to align incentives and ensure we are paid fairly.”

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Only Three-Quarters of Stores Are Profitable

100% of earnings come from just three-quarters of stores in the United States. This abysmal earnings potential for hundreds of locations means the company will likely shed 25% of brick-and-mortar locations.

The counter of a pharmacy where two people speak with two pharmacists across the counter

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Walgreens currently has over 8,600 storefronts throughout the country. Closing 25% of stores would mean up to 2,150 locations with thousands of employees laid off.

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Execs Can't Make the Numbers Work

The CEO added that the chain cannot sustain the high prices forced by inflation and increased costs associated with shipping and logistics. They’re going to need to make drastic changes to improve profitability.

A photo of Walgreens CEO Tim Wentworth wearing glasses and standing in front of a grey background

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“75% of our stores drive 100% of our profitability today,” Wentworth said. “What that means is the others we take a hard look at, we are going to finalize a number that we will close.”

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Consumers Are Unhappy With High Prices

Most shoppers have noticed that their grocery bills and prices for essential items have increased substantially over just the past few years. The brand knows that the high costs are forcing many consumers to cut down in essential areas.

Photo illustration of a pharmacist looking for medication on a shelf

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“The consumer is absolutely stunned by the absolute prices of things, and the fact that some of them may not be inflating doesn’t actually change their resistance to the current pricing,” he said. “So we’ve had to get really keen, particularly in discretionary things.”

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Most Underperforming Stores in Downtown Areas

Most of the stores suffering from losses are actually in the busiest areas.

A large Walgreens location next to a busy pedestrian street

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These places are much more expensive to run as they need additional staff and occasionally beefed-up security. Stores in downtown areas are much more susceptible to theft and shoplifting which is one of the biggest causes of losses for a company.

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The Brand Will Push Online Sales

Instead of losing money on physical retail locations, the company will increase their efforts to improve online sales.

A shelf at a pharmacy with several types of cold and flu medicine with white price tags

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Online shopping is a guaranteed way to remove shoplifting and avoid paying minimum-wage employees. The company hopes that it can increase profits as underperforming stores are shut down.

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