After years of financial struggles, Walgreens is spinning off into a private standalone company, and new CEO Mike Motz is purportedly bringing a “renewed focus on retail.”
That phrase, tucked into a press release from private equity firm Sycamore Partners—which purchased Walgreens’s parent company for $23.7 billion in August—hints at what could be a significant strategic pivot for a pharmacy chain whose retail business had arguably become an afterthought.
The disparity was starkly presented in the company’s last earnings report as a public company earlier this year. While pharmacy sales grew 11.8% in the third quarter, retail sales were down 5.3% due to weaker demand in key categories such as grocery, household, beauty, and health and wellness.
“Walgreens has not been tremendously successful at retail,” Neil Saunders, managing director and retail analyst at GlobalData, told Retail Brew. “It has, in fact, neglected retail, and that has created a lot of problems.”
Walgreens’s problems mounted in recent years, forcing the company to go on a cost-cutting spree that culminated in 2024 with a footprint optimization plan to close 1,200 locations over the next three years.
But financial struggles aren’t unique to Walgreens—just ask former rival Rite Aid, which has declared bankruptcy twice since 2023. The entire retail pharmacy industry has struggled to find its footing in the current retail environment.
“Let’s be frank; it’s a model that’s under pressure,” Chris Krese, SVP of congressional relations and communications at the National Association of Chain Drug Stores, said. “Over the past eight years, we’ve seen about 10% of pharmacies close, and right now they’re closing at a rate of about four pharmacies per day, which is a pretty shocking number.”
A lack of focus: But when asked about the role of retail in reversing this situation, Krese continued to tout the pharmacy side of the business, pointing to the expansion of pharmacy services as a “tremendous opportunity for the profession and for the industry.”
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He also gestured toward the importance of food offerings, and how “the increasing recognition of food as medicine” calls for the “integration of the total store in the pharmacy,” but otherwise didn’t provide a clear statement on how the industry is thinking about retail.
“To be quite blunt, most pharmacy chains in the US are absolute garbage as far as retail is concerned,” Saunders said. “They’re all as bad as each other.”
Outside of the US, however, there are some bright spots. One is the UK-based Boots pharmacy chain, which Walgreens acquired in 2014. That company distinguishes itself in the beauty and wellness categories, with a selection of premium products and a strong in-store experience—and yet in Saunders’ view, Walgreens never applied these lessons to its US businesses.
“It was always extremely surprising to me the extent to which they had a template within the group that they never really utilized in the US,” he said.
New pathways: The challenge for pharmacy chains is giving customers a reason to show up other than picking up a prescription. Traditionally, Saunders explained, the reason was convenience, but this business case has been diminished due to increasing competition from dollar stores, mass retailers, and e-commerce giants.
The alternative, he said, is picking a category—such as beauty in the case of Boots—and really standing out in that area, though even that route has become more challenging as specialized retailers such as Ulta have gained market share.
“A lot of the routes that would have been possible, or [where] you could have emulated Boots, for example, they’re more closed than they were,” Saunders said. “They’re not open pathways.”