Walgreens to Close 600 Rite Aid Stores

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Walgreens Boots Alliance, Inc. (NYSE:WBA) said it will shutter around 600 stores as part of its plan to buy nearly 2,000 Rite Aid locations. The Deerfield, Illinois-based company is in the process of acquiring 1,932 Rite Aid stores; the $4.4-billion transaction is expected to be completed by the spring of 2018.

Walgreens said the 600 stores, which will be mostly Rite Aid, will be within a mile of another store. As a result, some Walgreen stores will also be closing. The Rite Aid stores that remain open will be rebranded as Walgreens. The company has not yet said how many job losses will occur.

The store closures are expected to start in the spring of 2018 and roll out over the next 18 months. A list of the proposed store closures has not been released yet.

In September, Walgreens was given regulatory approval to purchase 1,932 stores and three distribution centers from Rite Aid for $4.38 billion. In its fourth-quarter financials, the drug store chain said the first few Rite Aid stores have been acquired and ownership of the remaining stores will be transferred in phases, with the goal being to complete the store transfers by spring 2018.

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Walgreens expects the complete integration of the two brands to be completed within the next three years, at a cost of around $650.0 million. On top of that, Walgreens expects to spend around $500.0 million on store conversions and other related initiatives.

In its recently announced fourth-quarter financial results, Walgreens reported a 22% drop in earnings, to $802.0 million, or $0.76 per share. The bulk of the decrease came from the more than $300.0 million in termination fees and costs associated with Walgreens decision to call off its acquisition of Rite Aid.

Excluding one-time items, adjusted earnings came in at $1.31 per share, a 22.4% increase over the $1.07 per share in the same prior-year period. Analysts expected Walgreens to report earnings of $1.22 per share.

Total fourth-quarter revenue came in at $30.1 billion, a 5.4% increase over the $28.6 billion recorded in the same period in 2016. Same-store sales were up three percent, with sales in the retail pharmacy division advancing 7.5% to $22.3 billion.

Pharmacy sales, which account for more than 72% of the division’s sales, were up 12.6%. Comparable pharmacy sales increased 5.6%. Retail sales, on the other hand, slipped 3.9%, with same-store retail sales down 2.1%.

 

Sources

Walgreens Boots Alliance Reports Fourth Quarter and Fiscal 2017 Results,” Walgreens Boots Alliance, Inc., October 25, 2017.

Walgreens Boots Alliance Secures Regulatory Clearance for Purchase of Stores and Related Assets from Rite Aid,” Walgreens Boots Alliance, Inc., September 19, 2017.

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Categories: Branch Closings, News

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