INSIGHTS AND PERSPECTIVES

From this angle: All eyes on Walgreens

BY Seth Mendelson

Is Walgreens plan to close 200 domestic stores just some housekeeping by the Deerfield, Ill.-based company or a sign of trouble for the chain, and perhaps the overall retail drug store industry?

From this angle, at least, it appears the decision announced late on Tuesday is a little of both. On one hand, this  easily could be just some cleaning up by Walgreens executives as the chain looks to spruce up its financial ledger in the future and is simply part of a previously-announced plan to cut costs by more than $1.5 billion over the next couple of years. Earlier this year, Walgreens Boots Alliance said it planned to close 200 stores in the United Kingdom.

Even in the best of times — and these are not the best of times for retail — chains do close certain underperforming stores, while often adding more units elsewhere. This is probably the case with Walgreens’ latest decision, though it is also clear that the United States is overstored and there are signs that there may be too many pharmacy counters in the marketplace.

But this could also be a case of some financial distress for the giant chain. One must also remember that Walgreens, which operates about 10,000 units in the United States, did acquire nearly 2,000 Rite Aid stores in 2017 and not all of them may be fitting in with the chain’s future growth. There also is profit pressure at the pharmacy counter.

In the end, this decision needs to be closely watched. The pressure is on traditional retailers these days, and chain drug stores certainly have their financial challenges. Wall Street also is keeping the pressure on this company and demanding better results than the nearly 25% decline in quarterly net income Walgreens announced in June.

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