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CNN
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Walgreens is closing about 1,200 stores as the drugstore chain struggles with online competition and declining prescription drug payments.

By 2027, about one in seven Walgreens currently open will close its doors. About 500 Walgreens will close their doors over the next year, the drugstore chain announced Tuesday.

The closures represent a significant escalation from a few months ago, when the financially troubled company announced in June that it would close 300 underperforming locations as part of a multiyear optimization program under CEO Tim Wentworth. At the time, the company said about a quarter of Walgreens stores were unprofitable, and the chain promised “immediate” changes.

Nevertheless, the company managed to achieve higher than expected sales in the last quarter. The chain's sales rose 6% from the same quarter last year, but Walgreens reported a $3 billion loss, largely due to a writedown of a Chinese pharmaceutical chain and a home care provider called CareCitrix.

According to Neil Saunders, retail analyst and managing director at GlobalData Retail, the latest phase of closures is “emblematic of a company in trouble and trying to correct its course”.

“Walgreens has spent years building its business through acquisitions while neglecting the fundamentals of its stores and retail operations,” he told CNN. “This has put many branches in the position of suffering a loss of sales and not generating a return.”

Walgreens (WBA) shares rose nearly 4% in premarket trading. However, the stock is down almost 70% for the year.

The closures come at a difficult time for drugstore chains, which are under pressure on several fronts.

Major drugstore chains, including CVS and Rite Aid, have struggled in recent years with declining profits from filling prescriptions. They have declined due to lower prescription drug reimbursement rates and new competition from Amazon.

Earlier this month, CVS said it would cut about 2,900 jobs as part of a $2 billion cost-savings initiative. The layoffs, which primarily affect corporate jobs, are in addition to around 5,000 job cuts announced last year.

The drugstore front end, which sells snacks and household staples, is also under pressure from larger competitors including Target, and even Dollar General's growth has also hurt drugstore chains in rural areas.

In May, Walgreens cut prices on more than 1,000 items, following rivals in an attempt to lure back inflation-weary shoppers put off by high prices.

CEO Wentworth said in a statement that “the turnaround will take time, but we are confident it will deliver significant financial and consumer benefits over the long term.”

For Saunders, Walgreens' elimination of dead wood “will help the company strengthen its finances over time, but it is a major admission of failure.”