Shoppers Are Abandoning Walgreens, Data Shows—Here's Why

Walgreens just reported new losses.

Walgreens is the latest retailer to confirm concerning financial results. In an Oct. 12 press release, the company announced its earnings report for both the fourth quarter and its entire 2023 fiscal year. According to the data, Walgreens Boots Alliance (WBA) reported significant losses for both earning periods, which ended on Aug. 31.

The company experienced a net loss of $180 million in the fourth quarter and a net loss of $3.1 billion during the entire 2023 fiscal year. "Our performance this year has not reflected WBA’s strong assets, brand legacy, or our commitment to our customers and patients," the company's interim CEO Ginger Graham said in a statement.

RELATED: Shoppers Slam CVS and Walgreens for "Frustrating" Vaccine Rollout.

The company says consumer behaviors are shifting.

The latest losses look to be a direct result of decreased demand. During an Oct. 12 earnings call with analysts, WBA's interim global CFO Manmohan Mahajan admitted that the company's U.S. retail business was negatively "impacted by a weaker-than-normal respiratory season and a continued shift in consumer behaviors, driven by a challenging macroeconomic environment."

These challenges caused nationwide retail sales to fall by 4.3 percent and a 0.5 percent decline in total prescriptions filled for the fourth quarter, according to the company's report. Mahajan said Walgreens stores saw an 80 percent decline in the sale of COVID-19 test kits, as well as declining demand for cough, cold, and flu products. The company was also impacted by a weakness in summer seasonal sales, "as customers continue to pull back on discretionary spending," he added.

RELATED: Walgreens Store Bans Purses and Bags to Prevent Shoplifting—Will Others Follow?

Walgreens is working on a major cost-cutting initiative.

But the healthcare company is already trying to turn things around. "In just six weeks, we have taken a number of steps to align our cost structure with our business performance, including planned cost reductions of at least $1 billion, and lowered capital expenditures by approximately $600 million," Graham said in a statement accompanying the release. "We anticipate seeing the impact of these actions in fiscal 2024, beginning in the second quarter."

Some of the actions Walgreens is taking to fix its financial losses include reducing its retail inventory and optimizing its mix of products, Graham told analysts during the earnings call.

But others say the retailer should also consider cutting certain product costs. "Walgreens has lost customer share in areas like beauty and personal care," GlobalData Managing Director Neil Saunderstold Reuters. "Some of this is because prices remain too high and are uncompetitive—something more and more shoppers won’t tolerate in the current environment."

The company is planning to close stores as well.

As part of its initiative to save $1 billion over the next fiscal year by reducing all non-essential spending, Walgreens is also taking a look at its physical footprint. Back in June, the company announced that it was planning to close 150 stores in the U.S. by the end of the 2024 fiscal year to optimize its portfolio. And during the most recent earnings call, officials confirmed that they are still planning on closing certain locations, as well as altering store operating hours in various places.

"We are closing unprofitable locations, and that's going to be accretive in the year," Mahajan said. "We have optimized store hours in certain locations to match with where the local market already is."