Walgreens Shocks The Street with 1,200 Store Closings... Shares Pop North of 15% (Yeah, Makes Sense)

Here’s a line that doesn’t really make sense when you first take a gander at it: Walgreens is closing over 1,200 stores in the next three years… yet, shares ended up popping 15.7% on the news. Classic.

(Source: Giphy) 

In short, Walgreens has been feeling the heat from all sides—whether it’s the rise of online prescription delivery platforms or just good ol’ retail apocalypse vibes. So, naturally, they’ve decided it’s time for a little "footprint optimization" (read: closing underperforming stores and hoping no one notices). 

(Source: USA Today) 

CEO Tim Wentworth is leading the charge, having already slashed $1.9 billion in debt since taking the reins last year. Meaning, he’s the guy you call when you need to clean up a mess, and right now, Walgreens is one hell of a mess.

Which is why investors were apparently all horned up when Walgreens announced it’ll close 500 stores next year alone, with plans to hit the 1,200-store mark by the end of 2026 - with another 800 stores are under "evaluation." Translation: they’re probably next on the chopping block. 

(Source: Yahoo Finance) 

You see, Wentworth and his crew are focused on cutting costs, but don’t worry—they’ve assured us that "there’s no more de-staffing left to do." Which is great, because those stores are already running on skeleton crews. Seriously, have you been to Walgreens lately? It’s like the pharmacy version of a ghost town where I live. 

But hey, at least the stores they’re shuttering are the ones making no money. In fact, the CFO, Manmohan Mahajan, said they’re "prioritizing closing locations that are cash flow negative." You know, the ones where the shelves look like they were ransacked and the only thing you can find is expired Halloween candy. Makes sense.

(Source: Giphy) 

However, It’s not just store closures, though. Walgreens is caught in a brutal fight with pharmacy benefit managers (PBMs) over prescription reimbursements. These middlemen have been tightening the screws on pharmacies for years, and Walgreens has had enough. Wentworth’s approach? Walk away from any deal that doesn’t make financial sense. That’s right—he’d rather kiss off some business than lose money. I mean, when you’re posting a $3.48 loss per share, you’ve gotta take a stand somewhere, amirite?

(Source: Fierce Healthcare) 

On the other hand, it’s not just Walgreens getting squeezed. CVS is in the same boat, having just laid off 2,900 corporate workers and shut down its own chunk of stores. The problem is due to the fact that both chains expanded like they were playing a game of Big Pharma monopoly, gobbling up every corner store like Walter White gathers territories. Which is why now, with all the changing consumer habits we’ve seen during the digital revolution combined with increased competition from Amazon, Walmart, and even Costco, they’re overextended.

So, what’s the plan? Walgreens is trying to rebrand itself as a pharmacy-first company (you know, because that’s what it was supposed to be all along). But it’s not just about selling meds. The company’s also trying to figure out how to make the whole prescription reimbursement thing work in its favor. Wentworth seems confident Walgreens can renegotiate with PBMs and come out on top, but let’s just say: I wouldn’t hold my breath.

(Source: Giphy) 

Don’t get me wrong—Walgreens isn’t dead yet. They’ve got some cash in the bank and are still raking in $37.5 billion in revenue last quarter. But it’s clear that they’re in the early innings of a major turnaround. If they can pull off this store-closing, debt-reducing, PBM-battling strategy, maybe they’ll live to fight another day. If not, well, there’s always Amazon Pharmacy… greaaaat. 

In the meantime, keep an eye on this Walgreen turnaround going forward, because apparently bad-news makes stocks skyrocket these days. Who knew? As always stay safe and stay frosty, friends! Until next time… 

P.S. BOOM! Our massive alert this morning has already hit a peak gain of 65.61% so far… and now with a minor retracement, it looks like it’s headed for more! Click here asap to get in on the action. 

Stocks.News holds positions in Amazon as mentioned in the article.