Walgreens has yet again announced layoffs of hundreds of employees across two states. The company plans to downsize its branches as part of its cost-cutting efforts. This move will affect almost 650 jobs in Dayville and Orlando, as Walgreens plans to close branches on May 17.
This news comes after the recent layoffs in February this year when Walgreens fired 145 of its employees.
Key Takeaways
- Cost-Cutting Measures Lead to Layoffs and Store Closures: Walgreens’ approach of closing stores and cutting expenses is coupled with the company’s recent announcement of layoffs that will impact around 650 workers in two states.
- Strategic Business Restructuring in Response to Performance Challenges: Walgreens began a comprehensive review of its costs and business plan in response to poor performance and falling stock prices. This includes intentions to close 450 stores worldwide and the closure of two distribution sites.
- Transition Towards Healthcare Services: Walgreens’ shift from traditional retail pharmacy operations to more extensive healthcare services, including pharmacy operations aimed at serving payers, providers, and pharmaceutical clients, is a strategic response to evolving consumer demands. However, this transition has encountered challenges, as indicated by “growing pains” in the US Healthcare segment.
- CEO Leadership and Strategic Direction: With the appointment of Tim Wentworth as CEO, Walgreens aims to navigate a challenging consumer environment while exploring strategic options to drive sustainable long-term shareholder value. Wentworth’s leadership comes at a crucial time as the company focuses on adjusting costs.
Walgreens Store Closure Plans and Workforce Reductions
Earlier in March, Walgreens announced the closure of two distribution centers, one in Orlando, Florida, and another in Dayville, Connecticut, affecting a total of 646 employees. The Deerfield-based retail, pharmacy, and healthcare company will shut down the Orlando facility, resulting in layoffs for 324 workers and the Dayville location, impacting 322 workers, according to Walgreens spokesperson Marty Maloney. The final day of operations for both sites is set for May 17. Maloney stated that all affected employees will receive severance and additional separation compensation.
A company official stated that they are dedicated to restructuring their operational framework to optimally serve their customers and patients. This involves assessing their distribution center operations to support their stores more efficiently. Following a thorough evaluation, the difficult decision was made to close the distribution centers in Orlando, Florida, and Dayville, Connecticut. This action will result in the termination of approximately 646 positions.
Towards the end of last year, after experiencing several quarters of lackluster performance and a declining stock price, the retailer began reassessing its expenses and identifying potential cost reductions.
After serving as CEO for two and a half years, Rosalind Brewer left Walgreens in September. The company has been concentrating on providing more comprehensive healthcare services instead of its conventional retail pharmacy activities. Walgreens announced in October that it would reduce expenses by $1 billion. The company expects to see the savings during the current fiscal year’s second quarter, which begins in 2024.
The company plans to shut down 450 stores—300 in the United Kingdom and 150 in the US—as part of broader cost-cutting measures. At the same time, it announced a “restructuring” of the organization. This strategy includes reducing non-essential expenditures, contracted services, and project work and optimizing the company’s transportation network.
The pharmacy chain ended a year that saw many store closures, a prior round of layoffs, and notable changes in the C-suite, including the departures of the CIO, CFO, CEO, chief marketing officer, and chief medical officer, by terminating 5% of its corporate workers in November.
In January, the company reported a net loss of $67 million for the first quarter, a decrease from the $3.7 billion loss recorded in the same quarter the previous year. This was followed by the announcement of over 140 employee layoffs in February and the decision to close all of its Village MD clinics in Florida and six clinics in Illinois.
According to Tim Wentworth, the company’s new CEO, the company was dealing with a challenging consumer environment. At the time, he stated that the business was investigating all strategic options to promote long-term, stable shareholder value. This involved prioritizing capital allocation in a balanced manner and acting quickly to improve cash flow and adjust costs.
Walgreens has been enhancing its pharmacy operations to provide healthcare services to payers, providers, and pharmaceutical clients. However, the retailer has encountered “growing pains” in its US Healthcare segment, according to Tim Wentworth, a former Cigna executive who recently assumed the CEO role at the pharmacy giant. He discussed these challenges during an earnings call last month.
For the first quarter, the unit generated sales of $1.9 billion, a significant increase from $989 million in the same period last year. Despite this growth, the US Healthcare segment still reported an adjusted operating loss of $96 million, which, while an improvement, is down from a $152 million loss in the previous year.
About Walgreens
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Walgreens Boots Alliance, Inc. is a multinational corporation involved in the pharmacy, retail, and healthcare sectors, with operations in several countries, including the United States, Germany, the UK, and others. The company has three primary divisions: International, US Healthcare, and US Retail Pharmacy. The US Retail Pharmacy division operates drugstores, offering health and wellness services and specialty and home delivery pharmacy services, and sells products ranging from health and wellness items to personal care, beauty products, general merchandise, and consumables.
The International division oversees the sales of prescription drugs and consumer health products and manages pharmacy-led health and beauty retail stores under the Boots brand in Ireland, Thailand, and the United Kingdom, as well as the Benavides brand in Mexico and the Ahumada brand in Chile. The US Healthcare division includes VillageMD, which provides value-based primary and multi-specialty care through clinics, home visits, and online platforms; Shields, which enhances specialty pharmacy services for hospitals; and CareCentrix, which specializes in managing post-acute and home care. Established in 1909, Walgreens Boots Alliance, Inc. is headquartered in Deerfield, Illinois.
Conclusion
Walgreens’ recent announcement of layoffs and store closures underscores the company’s commitment to strategic restructuring amidst performance challenges and evolving consumer demands. The decision to reduce its workforce and shutter distribution centers reflects a concerted effort to streamline operations and optimize costs in response to lackluster financial results and declining stock prices.
With a focus on transitioning towards healthcare services and enhancing pharmacy operations, Walgreens aims to navigate a challenging consumer environment under the leadership of CEO Tim Wentworth. Despite encountering “growing pains” in its US Healthcare segment, the company remains dedicated to fostering sustainable long-term shareholder value while providing its customers essential health and wellness services. As Walgreens continues to adapt its business model and prioritize operational efficiency, it remains a key player in the pharmacy, retail, and healthcare sectors, serving communities across multiple countries.
