Closures in Northeast, South To Begin Next Spring; Save the Company $300 Million a Year
After winning federal regulatory approval last month to acquire 1,932 Rite Aid Corp. (NYSE: RAD) stores for $4.38 billion, Walgreens Boots Alliance Inc. (NASDAQ:WBA) announced plans to close 600 of the pharmacies.
Following regulatory clearance, Walgreens completed a comprehensive review of the combined store portfolio to determine the scope for optimizing locations. This has resulted in a decision to close approximately 600 stores and related assets over an 18-month period, beginning in spring 2018, the company said.
The estimated cost of the closure program is expected to be $450 million — a substantially all cash spend. However, it will net the company about $300 million per year in annual costs savings by the end of 2020, Walgreens said.
“Post the transaction, the teams really looked at it location by location,” said Alexander W. Gourlay, co COO of Walgreens. “And really, the vast majority of these closures will be Rite Aid and the vast majority being closed are within one mile of another drugstore that we own going forward.”
“It really is about improving access to Walgreens in the future and in the Northeast and the Southern [regions] of the country,” he added.
At the same time, Walgreens plans to invest around $500 million in the remaining Rite Aid store conversions.
Following the closures, Walgreens will have about 9,400 locations in the U.S., nearly equal to its rival CVS Health. Rite Aid will retain more than 2,500 stores.