Image caption: Green Pharmacy Cross Sign – Symbol of Medical and Pharmaceutical Services
After more than a century as a publicly traded company, Walgreens is leaving the stock market behind. Once a leading name in American retail and pharmacy, the company is being taken private in a €9.1 billion ($10 billion) deal following a decade marked by underperformance, strategic missteps and evolving consumer behaviour. Once at the height of its power, Walgreens attempted to transform itself by investing heavily in healthcare and expanding its footprint, but the strategy failed to produce the results needed to keep pace with competitors and market trends. The decline of Walgreens reflects not only company-specific challenges but also the wider transformation of the retail pharmacy landscape.
A Fragmented Healthcare Strategy
In an effort to maintain relevance amid the decline of its traditional retail business, Walgreens turned toward healthcare services as a new growth area. The company spent billions acquiring primary care providers such as VillageMD, Summit Health and CityMD, promoting a vision of a seamless, integrated healthcare delivery model that linked home, pharmacy and clinical services. However, this strategy encountered a number of difficulties. Unlike some competitors that chose to integrate vertically by acquiring both providers and insurers, Walgreens aimed to remain an independent partner to health payors. This decision led to a fragmented portfolio of healthcare assets that lacked the cohesion necessary to operate efficiently or profitably.
Instead of a coordinated system, the company was left with a loosely connected group of clinics and services without a unified strategy to tie them together. As changes to value-based care models and risk adjustment policies introduced new financial pressures, Walgreens found itself with a costly healthcare infrastructure that failed to deliver sustainable returns. Meanwhile, the company’s retail base—which was supposed to complement this healthcare transformation— continued to face pressure from declining foot traffic and consumer shifts. The healthcare investments that were intended to revitalise the business ended up weighing it down, as operational complexity increased without a clear path to profitability.
Retail Decline and Operational Strain
At the same time that Walgreens was attempting to pivot toward healthcare, its core retail business was undergoing rapid decline. The traditional model—driving in-store sales through pharmacy visits and encouraging purchases of over-the-counter items—lost its effectiveness in the face of digital disruption. Consumers who once visited physical locations for supplements, toiletries or convenience goods increasingly turned to online platforms like Amazon for quicker, often cheaper alternatives. This shift in consumer behaviour made it difficult for Walgreens to compete using its existing store format.
Store operations also became a challenge. Incidents of retail theft led the company to lock up everyday items behind glass, creating a less inviting shopping experience. Staff shortages and the absence of self-checkout options made visits more time-consuming and frustrating for customers. As larger retailers offered more competitive pricing and smoother in-store experiences, Walgreens’ stores began to feel outdated. The company was also burdened by past decisions that added to its challenges. The merger with Alliance Boots, intended to bring global scale, instead resulted in significant debt. The acquisition of half of Rite Aid’s locations added further complexity at a time when physical retail was already under pressure. Meanwhile, legal issues related to the opioid crisis introduced both financial liabilities and reputational damage, further straining the company’s ability to execute a successful turnaround.
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Declining Valuation and the Move to Private Ownership
By 2022, the cumulative effects of these challenges were clearly reflected in Walgreens’ valuation. Once worth €96.5 billion ($106 billion), the company’s market value fell to just €6.5 billion ($7.1 billion) by the end of 2023. The decision to go private came through a €9.1 billion ($10 billion) offer from Sycamore Partners, a private equity firm known for acquiring distressed retail assets. The transaction includes an additional potential payout tied to the divestiture of the company’s healthcare holdings—Village Medical, Summit Health and CityMD—suggesting that even investors saw these assets as burdensome rather than valuable. This shift to private ownership marks the end of Walgreens’ 100-year presence on the public markets and signals a major transition in its business strategy.
The wider retail pharmacy sector is undergoing similar adjustments. CVS is closing stores and focusing on smaller, pharmacy-led formats. Rite Aid has restructured through bankruptcy. The concept of value-based care, once widely promoted, has proven more complex than many retail operators anticipated. Walgreens’ recent strategy represents the final chapter in a broader pattern of retailers attempting and struggling to move into healthcare. However, while the large-format drugstore may be fading, the role of pharmacists is expected to evolve. As retail models shift, pharmacists are likely to play a greater role within care teams, contributing more directly to clinical outcomes in integrated healthcare settings.
Walgreens’ departure from public markets brings to a close a significant era in American retail. Its attempt to reinvent itself through healthcare expansion and strategic acquisitions ultimately fell short due to misalignment, operational complexity and market headwinds. The transition to private ownership offers a chance for restructuring, but the company’s recent history will likely be viewed as a cautionary example of how large-scale transformation requires more than investment—it requires cohesion, adaptability and a clear understanding of evolving consumer and industry demands.
Source: Hospitalogy
Image Credit: iStock
