Walgreens is considering substantial closures of its stores in response to what its CEO characterized as a “challenging” environment for pharmacies and U.S. consumers, following quarterly earnings that failed to meet Wall Street’s expectations. On Thursday morning, the pharmacy chain disclosed disappointing financial results, resulting in a sharp 22% decline in its stock price.

In an interview with CNBC, CEO Tim Wentworth voiced apprehensions about diminished consumer spending forecasts for the remainder of the year. “We had anticipated...in the latter half, an improvement in consumer sentiment,” Wentworth noted, “but that hasn’t materialized.” He underscored that consumers are grappling with elevated prices across various sectors, irrespective of whether those items are experiencing inflation. Consequently, Walgreens has adopted a cautious stance, particularly concerning discretionary expenditures.

Last month, Walgreens announced its intention to lower prices on around 1,300 products, echoing a strategy employed by Target to better accommodate customers facing financial constraints.

While Wentworth refrained from specifying an exact number of closures, he suggested that as much as 25% of Walgreens’ expansive network of approximately 8,600 stores could be under review. “Seventy-five percent of our stores currently generate 100% of our profitability,” Wentworth explained. “Therefore, a rigorous evaluation of the remaining stores is necessary, and we will soon determine the exact number slated for closure.”

Walgreens has confronted enduring challenges over the past decade, with its stock price steadily declining from a peak exceeding $95 per share in 2015 to less than $15 presently. Revenue derived from prescription drugs has seen a decrease, while its retail operations continue to face competitive pressure from major retailers and the e-commerce titan Amazon. Last summer, the company had already disclosed plans to shutter 150 stores across the United States.

Currently, Walgreens is roughly one-third the size of its principal competitor, CVS, which has also grappled with its own set of challenges in recent years.

Since the onset of the Covid-19 pandemic, Walgreens has navigated a period marked by leadership changes. Tim Wentworth assumed the role of CEO in October, succeeding Rosalind Brewer, a seasoned executive from Starbucks and Walmart, who unexpectedly departed after less than three years in the position.

Amidst these challenges, a notable bright spot for Walgreens has been its healthcare segment, which surpassed revenue expectations. The company regards on-site medical services and specialized pharmacy offerings as pivotal elements in its ongoing transformation from a traditional drugstore chain into a prominent player in the healthcare sector.