Walgreens is one of the latest companies to be struck down by the challenges of inflation. American families and company owners are all facing a similar fate. Here’s what happened.
Closing Doors To Survive
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The spokesperson for Walgreens has announced the company’s plan to close almost 700 branches throughout the country because of inflation costs.
Underperforming Dangers
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There are a few branches that have really struggled to keep up with costs and were severely underperforming. As a result, the company will close the doors of the selected branches.
Weak Consumer Spending
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Since the start of the year, consumers have shown more caution when spending their hard-earned money. The rising inflation has affected many households, and stores like Walgreens have seen a drop in sales.
The Alliance
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The Walgreens Boots Alliance, or WBA, has been strong for many years. Still, the struggle to survive during these costly times is even causing the closure of possibly 700 stores in the United Kingdom.
Cutting Costs
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With hundreds of stores closing down, the company estimates $3.8 billion to $4.1 billion in pre-tax charges. These figures are in accordance with the company’s regularity filing.
Starting Strong
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Walgreens began its journey in 1901 in Deerfield, Illinois, by founder Charles R Walgreen Sr. Mr Walgreen had a natural knack for connecting with people and his customers in general. Customers felt supported and happy to have their pharmaceutical needs met.
Alliance Kicks Off
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In 2014, the company established an alliance with the Swedish brand Boots, and together, their stocks became stronger on the market, and the company did well.
Expansive Company
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The company has established over 12,500 locations in the United States and Europe. They are also powered by a workforce of more than 330,000 people.
Present in 50 States
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Walgreens has grown as a firm and stores in 50 States, including the District of Columbia, Virgin Islands, and Puerto Rico.
Structural Changes Afoot
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In 2023, the company’s CEO, Tim Wentworth, employed structural changes for the well-being of the business. These changes included plans to close underperforming stores and salvage roughly $1 billion in costs.
Halved Dividents
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According to Reuters, the Walgreens brand has also managed to reduce its dividends by 50% per share. The strategy was to safeguard the company before the impact of inflation caused further damage, but there was still trouble.
Over-The-Counter Costs
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The pharmacy struggled with Over-the-counter (OTC) drug expenditures and RX (script) filing expenses.
Not Happy With the Books
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David Wagner, the portfolio manager and equity analyst for Aptus Capital Advisors, said that “the results this morning was just absolutely terrible. I mean, it’s been the theme of the last eight earning reports, to be brutally honest.”
Strong but Bad
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Wagner’s comment came as a result of the company’s stock reports. From 1995, the company’s stocks rose steadily until 2015, when it continued to crash.
The Struggle Predicted To Continue
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According to Reuters, Walgreens may continue to face challenges until 2025.
Making Changes Sooner Than Later
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The company’s CEO also said there were plans in place that would benefit the business and its customers. He also added that it would be a matter of “quarters” and not years before the structural changes are implemented.
Focus on the Pharmacy
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Wentworth has expressed that the changes will focus on the company’s core values and strengths: their retail pharmacy.
Primary Care Providers Included in the Company
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Wentworth has also said the company won’t be using the primary care provider, VillageMD, as the majority primary care provider in its portfolio. Instead, the company will strengthen its investments with UK-based Boots and Shields Pharmacies.
Cutting Costs Out of Necessity
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It had to close underperforming branches to help the company curb the inflation costs and challenges. To date, over 560 stores have already been shut in the U.K. and in the U.S. 670 stores.
You May Have To Travel Further for a Walgreens
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Customers may be impacted by the large number of stores closing down and, as a result, travel further to reach a branch. Only time will tell what lies in store.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
