Neighborhood Retailer To Shut Down 1,200 Locations Amid Struggles

What happens to America's neighborhood retailers when customers have less and good reason to shop in the neighborhood? This is the question Walgreens Boots Alliance, Inc. (NASDAQ: WBA) , a long-time pharmacy and convenience chain, is asking itself as it heads into an era of turnaround.

In an October 2024 Q4 earnings call, Walgreens CEO Tim Wentworth announced the chain's plan to shut down 1,200 Walgreens locations over a three-year span. Around 500 Walgreens are expected to be shuttered within fiscal year 2025, although no word yet on the exact store locations. Wentworth insisted the majority of the chain's 8,500 or so nationwide stores are profitable, but that closures will focus on underperforming stores, especially those with leases ending soonest.

While consumers and investors alike may immediately fear a bankruptcy filing in the offing (like what happened to Toys 'R' Us), Wentworth has expressed confidence that the "footprint optimization" plans discussed in the call will be an effective turnaround strategy for Walgreens.

Walgreens was founded as a neighborhood pharmacy in turn-of-the-century Chicago by Charles R. Walgreen. Back in 1901, Walgreens was a small space focused on pharmacy services, but by 1920, it had grown into a small fleet of neighborhood drugstores, stocked with soda fountains and a hallmark milkshake. Today, Walgreens is the second-largest pharmacy in the U.S., second only to CVS Health.

Throughout the past 10 to 15 years, Walgreens has seemed to invest more in acquisitions than the shopping experience of neighborhood stores. As Walgreens stores with prime-corner real estate went understaffed and overprotected from petty theft potential, the corporation acquired drugstore chain Duane Reade in 2010, Kerr Drug in 2013, and Rite Aid in 2017 (after multiple attempts). This is only a partial list of Walgreens Boots Alliance's acquisitions, and none came for a song. Acquiring Rite Aid alone cost WBA $4.38 billion.

In addition to acquisition debts and a lack of investment when it comes to the in-store shopping experience, Walgreens has faced its share of lawsuits and controversy in recent years. Walgreens has been sued by shareholders, employees, and has even been held legally and financially responsible for its role in the American opioid crisis. Additionally, Walgreens has had a tumultuous relationship with Medicaid, Express Scripts, and other providers over prescription drug pricing and reimbursement. With this said, the weight of these financial decisions combined with shifting consumer shopping habits has likely made turnaround a potential path to recovery for the chain.

Things aren't looking promising for neighborhood drugstores in the U.S. at this moment in time. In addition to Walgreens' pending store closures and CVS' own store closures in recent years, it paints a grim picture for consumers, let alone shareholders. Where will people get their prescriptions if not at their corner drugstore? While e-commerce is well and good, it doesn't provide the same convenience as a physically close neighborhood retailer when consumers are in need of last-minute medication.

As it is, though, it doesn't appear that any of these old-school drugstore chains have yet cracked the new-school drugstore code. Whichever chain does figure out how to compete with mammoth online and in-store retailers a la Amazon and Walmart, respectively, will likely become the new model of old-school service. Tim Wentworth seems to think Walgreens stands a fighting chance, saying in the Q4 call: "Fiscal 2025 will be an important rebasing year as we advance our strategy to drive value creation. This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term."

To make such an attempt at this relevancy, Walgreens plans to continue an experiment with smaller-format stores. Pharmacy-forward stores without many other conveniences to shop for are already part of Walgreens Boots Alliance's turnaround plan. Perhaps returning to the store's 1901 roots may spell success for the chain, nearly 125 years later. (See what's next for one of America's biggest discount retailers, Big Lots, as it closes more stores, too.)