Walgreens will close approximately 1,200 stores as it grapples with growing competition from online retailers and shrinking payments for prescription drugs.

By 2027, nearly one in seven of the company’s current locations will close. Over the next year alone, 500 stores are set to shut down, Walgreens announced on Tuesday.

This move marks a sharp escalation from June, when the struggling retailer revealed plans to close 300 underperforming stores as part of a multi-year optimization strategy led by CEO Tim Wentworth. At that time, Walgreens disclosed that roughly 25% of its stores were unprofitable and signaled that significant changes were on the horizon.

Walgreens reported stronger-than-expected sales last quarter, with revenue rising 6% year-over-year. However, the company still posted a $3 billion loss due to a writedown of a Chinese pharmaceutical chain and a home care provider, CareCitrix.

Shares of Walgreens rose nearly 4% in premarket trading, though the stock remains down almost 70% this year.

Drugstore chains like Walgreens, CVS, and Rite Aid face declining profits from prescription sales due to lower reimbursement rates and competition from Amazon. CVS recently announced 2,900 job cuts as part of a $2 billion cost-saving initiative.

Additionally, drugstores are losing ground to competitors like Target and Dollar General, particularly in selling snacks and household goods. In May, Walgreens reduced prices on over 1,000 items to attract budget-conscious shoppers.

As the retail landscape continues to shift, Walgreens is facing the reality that it must adapt in order to survive. The decision to close approximately 1,200 stores is a tough but necessary move in order to stay competitive in the market.

CEO Tim Wentworth’s multi-year optimization strategy is a bold step towards reviving the struggling retailer. With a quarter of its stores currently unprofitable, it is clear that significant changes are needed in order to turn the company around.

Despite a stronger-than-expected sales quarter, the $3 billion loss is a harsh reality check for Walgreens. The writedown of a Chinese pharmaceutical chain and a home care provider is a reminder of the challenges the company is facing in the current market.

The rise in premarket trading shares is a positive sign, but the overall stock performance this year is a cause for concern. With competition from online retailers like Amazon and traditional retailers like Target and Dollar General, drugstore chains are feeling the pressure to innovate and adapt in order to stay relevant.

The recent announcement of job cuts at CVS is just one example of the challenges facing the industry as a whole. Lower reimbursement rates for prescription drugs and increased competition are forcing companies to reevaluate their business models and make tough decisions in order to stay afloat.

As Walgreens looks towards the future, it is clear that the company is taking steps to ensure its long-term viability. While the closure of 1,200 stores is a difficult decision, it is a necessary one in order to position the company for success in the years to come.