Walgreens to close 'underperforming' U.S. stores

June 27 (UPI) -- Walgreens plans to close a "significant portion" of its U.S. stores, the company's top executive said Thursday.

CEO Tim Wentworth told industry analysts in a conference call that the closures are due to a quarter of Walgreen's 8,500 stores "underperforming."

Not all of those stores, however, are immediately on the chopping block. Wentworth said the exact number of closures was yet to be decided. Walgreens said it would make changes at the remainder of the stores to boost their performance, but the company "will continue to consider closure" if the efforts are not successful.

Walgreens also said it will work to minimize layoffs and "redeploy the vast majority" of workers at closing stores, Wentworth said.

The announcement follows a rough couple of years for the pharmacy giant. In May 2023, the company slashed 10% of employees at its Chicago corporate offices after it was forced to pay nearly $6 billion to settle opioid lawsuits with several states.

Following the numerous legal battles, the company reported earnings per share were down 20.3% for the second quarter of fiscal year 2023.

Former CEO Rosalind 'Roz" Brewer stepped down in September of that same year.

Two months later, about 4,500 non-union pharmacists staged a three-day " Pharmageddon " walkout at Walgreens and CVS stores across the country to protest poor working conditions related to staffing cuts made since the COVID-19 pandemic.

The American Pharmacists Association in a statement on the protests accused the companies of "worsening heath disparities and creating a new public health emergency."

"Soon there will be no pharmacies in most communities to administer vaccines or provide testing for infectious disease," the statement read.

The APhA's prediction is inching closer to reality. Wentworth on Thursday's call said Walgreens is "at the point where the current pharmacy model is unsustainable."

The company reported $28.5 billion in revenue during the second quarter of FY2024, which was up slightly over the same period last year but still below expectations. The company has struggled to retain consumer spending after years of elevated prices.

"Our customers have become increasingly selective and price-sensitive in their purchases," Wentworth said.

Walgreens this year cut prices on hundreds of items, such as snacks, coolers and gummy vitamins, which has brought back some customers, but at the same time has hurt profit margins, Walgreens Boots Alliance CFO Manmohan Mahajan said on the call Thursday.

Wentworth also said Walgreens is wrestling with costly industry regulations and insufficient reimbursement. He noted the company's relationship with third-party pharmacy benefit managers, which act as intermediaries between pharmacies and insurers.

"We continue to have active discussions with PBM and supplier partners," he said.