Walgreens Plans to Shutter Stores and Refocus after Weak Earnings

Walgreens has roughly 8,600 pharmacies across the US. It’ll have far fewer soon. 

After missing its third-quarter earnings and slashing its full-year outlook, Walgreens’ new leader is planning a rebound for the struggling chain, starting with shuttering a substantial, if unspecified, number of US locations.

Doctor’s Note

Recently, pharmacies tried to push into medical care, acting not only as centers to fill prescriptions but clinics that administer disease screening, physicals, vaccinations, and more. The results have been terrible. 

CVS has been shutting down dozens of its MinuteClinics, and Walmart will close its remaining clinics and telehealth services due to lack of profitability. Amazon is still forging ahead with its healthcare division, this week announcing that it’s consolidating its telehealth service with its One Medical primary care business. Walgreens — whose stock is down about 55% YTD — reported a roughly $6 billion impairment charge on its investment in clinic operator VillageMD. And now, the company has to get back to basics:

• It’s unclear exactly how many locations Walgreens will close, but CEO Tim Wentworth — who filled the position in October — told The Wall Street Journal the company is reviewing a quarter of its underperforming stores. He added some will shutter over rampant theft or because they’re just too close in proximity to other locations.
• Wentworth said the closures are focused more on reducing the company’s physical footprint rather than its workforce, and employees can be reassigned to other locations. 

The PE Playbook: Rite Aid, which filed for bankruptcy last fall, is seeking court approval this week for a restructuring plan that will cut $2 billion from its debt and hand ownership over to a group of lenders including Brigade Capital, HG Vora, and more. Another fallen soldier in private equity’s conquest of America’s healthcare system.