Walgreens plans to shutter 200 stores in the U.S., revealing the closures two months after parent company Walgreens Boots Alliance said it would close approximately 200 Boots drugstores in the UK.
The new store closures represent less than 3% of the retailer’s approximately 10,000 U.S. locations, Walgreens said in a statement, adding that it anticipates retaining the majority of employees in other nearby locations.
Less than a day after the Walgreens store closure announcement, CVS said it would slow the pace of its annual store expansion by opening only 100 locations this year instead of the expected 300. In 2020, CVS will cut openings down to 50 locations.
In May, CVS said it would close 46 underperforming stores as part of an effort to resharpen its focus on top-performing stores. The pharmacy will redesign 1,500 stores into HealthHUB concepts by the end of 2021. CVS could close more unprofitable stores as it evaluates the 500 leases that come up for renewal every year.
Walgreens aims to save $1.5 billion in annual expenses by 2022 in what it’s calling a “transformational cost management program.” Walgreens expects to record a $1.9 billion to $2.4 billion earnings hit related to real estate, severance and other costs, the company said in a regulatory filing.
The announcement marks Walgreens’ largest round of closures since 2015, when it also closed 200 stores. Walgreens Boots Alliance, which bought 1,932 Rite Aid locations in 2018, has since closed 631 of those stores and plans to shutter another 119.
The latest closures come after a fairly rocky quarter for the pharmacy giant. Q3 sales increased 0.7% to $34.59 billion from a year earlier, with net income of $1.03 billion, or $1.13 per share, down 12.1%. Comparable sales at U.S. drugstores fell 1.1%, which Walgreens attributed to its “de-emphasis” of tobacco products. Walgreens is raising the minimum age to buy tobacco products to 21 in September. At the same time, Walgreens said rising prescription drug prices led to a 4.3% increase in U.S. pharmacy sales.
Walgreens has entered more than a dozen partnerships with companies such as Kroger, Birchbox, FedEx and LabCorp, mainly aimed at driving more traffic into its stores. But with both Walgreens and CVS maintaining such a large footprint throughout the country, it’s difficult to forecast what impact these partnerships will have on the retailer’s bottom line.