Walgreens said Wednesday that it will shutter 600 stores early next year following its $4.4 billion Rite Aid deal.
The company plans to shut down stores within a mile of another Walgreens or Rite Aid location. The closings will start next spring and will continue over an 18-month period.
The move is expected to cost Walgreens $450 million, but should save the Deerfield, Illinois-based company $300 million yearly by 2020, George Fairweather, Walgreens Alliance Boots chief financial officer, said on an earnings call this morning.
In September, the Walgreens Boots Alliance received regulatory approval to buy 1,900 Rite Aid stores from the Pennsylvania-based drugstore chain. The deal will make Walgreens the country’s largest retail pharmacy by store locations. Walgreens now has more than 13,200 stores worldwide.
The company said it expects to complete integration of the acquired stores within three years at an estimated cost of approximately $750 million. In addition, the company plans to spend approximately $500 million of capital on store conversions and related activities. The majority of the Rite Aid locations to change hands are on the East Coast.
Walgreens beat analysts’ fourth-quarter estimates on a solid expansion of its program that allows customers to fulfill prescriptions by mail. During the fourth quarter, ended Aug. 31, revenue was up 5.3 percent to $30.15 billion. Analysts had expected $29.93 billion.
“We are pleased to report the company has performed well, with our businesses delivering significant progress while managing against ongoing prescription reimbursement pressure and competing in fast-changing retail environments,” Walgreens Boots Alliance CEO Stefano Pessina said in a statement. “We look forward to building on this solid underlying growth in the year to come, enhanced by the expansion of our U.S. retail pharmacy network through the upcoming purchases of Rite Aid stores.”
Source: Sacramento Business Journal