Financial challenges in the drugstore retail sector have led to a major chain filing bankruptcy and closing hundreds of stores, while other pharmacy retailers are also closing stores, but not filing Chapter 11 petitions.
The most significant retailer bankruptcy in the past year was Rite Aid's Chapter 11 filing on Oct. 15, 2023, as it sought to reorganize, reject store leases, and close underperforming stores.
Don't miss the move: Subscribe to TheStreet's free daily newsletter
Initially, the retailer identified 154 stores it planned to close, but the amount grew to more than 800 stores by August.
Related: Another discount retailer shuts down, files Chapter 11 bankruptcy
The company filed for bankruptcy facing tough competition from CVS, Walgreens Boots Alliance, Walmart, Costco, and Mark Cuban's CostPlus Drug Company for prescription business.
The company also faced a civil lawsuit filed against it by the Department of Justice in March 2023 alleging that its pharmacists inappropriately filled opioid prescriptions, contributing to the opioid epidemic after they “repeatedly filled prescriptions for controlled substances with obvious red flags."
Rite Aid exited bankruptcy on Sept. 3 after reorganizing.
Huge drugstore chain CVS (CVS) in 2021 said it would close 900 of its nearly 9,900 stores to reduce costs and cut losses, closing 300 locations each year in 2022, 2023, and 2024.
The company said it would consider several factors before closing a store, such as maintaining access to pharmacy services, local market dynamics, population shifts, a community’s store density, and ensuring there are other geographic access points to meet the needs of the community.
Walgreens closing 1,200 stores in restructuring
Finally, giant drugstore chain Walgreens will close 1,200 underperforming stores in the next three years, with 500 closings planned in fiscal year 2025, as part of its out-of-court restructuring plan.
Related: Iconic outdoor retailer closes stores, no bankruptcy filing yet
Parent company Walgreens Boots Alliance (WBA) , which operates 8,000 stores with 6,000 profitable locations, said it will close locations with negative cash flows, underperforming stores where it owns locations, and ones with lease expirations coming due in the next few years to reduce the impact of dark rent, according to its Oct. 15 earnings call for fiscal year 2024.
The company plans to redeploy most workers from the stores it closes.
Walgreens in the third quarter began evaluating 2,000 stores for potential closure but identified 1,200 locations to shutter. The company focused on improving operating performance and cash flows from the remaining 800 stores and will continue to evaluate those and all other locations for the best possible retail footprint, CEO Tim Wentworth said in the earnings call.
The drugstore chain will also re-evaluate its merchandising strategy to offer a refreshed assortment of products, including its owned brands. The company said it will be more selective with national brands and expand its owned brands.
Walgreens in fiscal 2024 launched 300 new owned brands and plans to launch over 300 more owned brands in 2025.
The pharmacy chain hit three of its declared goals in its 2024 fiscal year, cutting costs by $1 billion, reducing capital expenditures by over $700 million, and realizing $600 million in benefits from working capital initiatives, Wentworth said.
Walgreens Boots Alliance reported a 6% increase in sales to $37.5 billion in the fourth quarter with a net loss of $3 billion compared to a $180 million loss in the same quarter in 2023.
Fiscal year 2024 sales rose 6.2% to $147.7 billion with a net loss of $8.6 billion, a 180.4% increase from the previous year.
Related: Veteran fund manager sees world of pain coming for stocks
