Walgreens, the nation's largest drugstore chain, is reeling from labor shortages, executive turnover, fierce competition, debt issues, retail theft and now a worker walkout.
Why it matters: The company's struggles — its stock is down nearly 44% this year — reflect the mounting challenges facing the drugstore industry.
The big picture: It's not just Walgreens. Standalone pharmacies are being hit by worker shortages and surging competition from mail-order pharmacies, big-box stores like Walmart and online threats like Amazon.
Rite Aid — the nation's largest drugstore chain at one point in the 1990s before Walgreens took the crown — filed for Chapter 11 bankruptcy two weeks ago.
Catch up fast: S&P last week downgraded Walgreens' credit rating to one step above junk status, citing concerns about the company's ability to pay down debt and maintain strong cash flow.
Last month, CEO Rosalind Brewer abruptly resigned — and a month before that, the company's CFO left.
This week, the company is dealing with a coordinated walkout of pharmacy employees in a national protest of working conditions that's been dubbed "Pharmageddon" on social media.
Meanwhile, the huge influx of foot traffic that pharmacies enjoyed from the pandemic — when customers rushed to get vaccinated — has subsided.
"This year you saw the vaccines go down, the traffic normalize, the consumer's struggling, there's theft, there's just a lot of challenges," S&P director Diya Iyer tells Axios.
Zoom in: Walgreens' archrival, CVS, has transformed its business into one that relies more heavily on health care revenue, including insurer Aetna, pharmacy benefits manager Caremark and a network of in-store clinics.
Aiming to do the same, Walgreens' VillageMD made a $9 billion acquisition of urgent care provider Summit Health in 2022. That deal has saddled Walgreens with debt that Iyer said has proven to be burdensome.
The other side: Walgreens spokesperson Fraser Engerman noted that the company has reduced debt by $2.6 billion over the past year and has announced plans in the last six weeks to cut at least $1 billion in costs while lowering capital expenditures by about $600 million.
"We are confident in our company's future and the ability to deliver greater value to our customers, shareholders, partners, and employees," Engerman said in an email, adding that new CEO Tim Wentworth "brings deep healthcare experience and a strong track record of running successful businesses."
Be smart: With some 10,000 stores, Walgreens isn't going anywhere anytime soon.
But part of the company's problem is that it has so many locations, Iyer said.
"They're trying to optimize to profitable locations and streamline and also repurpose the stores as a place where people can receive more primary care over time," she said. "That's quite complicated."
Compounding the company's troubles is this week's labor disruption, which is also impacting CVS and Rite Aid.
American Pharmacists Association CEO Michael Hogue said in a statement Monday that pharmacy benefit managers are "causing the closure of hundreds of pharmacies across America" while "worsening health disparities and creating a new public health emergency."
"Soon there will be no pharmacies (chain or independent) in most communities to administer vaccines or provide testing for infectious disease," Hogue added.
"We have taken steps over the last two years to improve pharmacists' experience, advance the profession and enable them to provide the high value care they were trained to do," Walgreens' Engerman said, adding "we also recognize ... there is increased demand for their services across communities."
The bottom line: Walgreens remains a staple in the American retail health landscape, but the company's financial challenges are daunting.
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