Walgreens to Close 600 Stores Next Year
Walgreens plans to close around 600 stores starting next spring, following its deal with Rite Aid.
Federal regulators accepted the drugstore chain's $4.4 billion deal to buy 1,932 Rite Aid stores in September. Walgreens initially tried to buy Rite Aid outright for $17 billion in October 2015.
Now following regulatory clearance, the company will begin to close the stores, mostly of the Rite Aid brand, over an 18-month period, beginning in spring 2018.
The vast majority of these closures are within one mile of another drugstore that the company owns going forward, said Alexander W. Gourlay, Co-Chief Operating Officer, Walgreens Boots Alliance, Inc.
"It really is about improving access to Walgreens in the future and in Northeast and the South of the country," said Gourlay.
As far as remodeling the existing stores, George Fairweather, EVP and Global CFO, Walgreens Boots Alliance, Inc. noted a sizable amount of these stores have been remodeled and are in good shape.
"In the past week, we've acquired the first stores to confirm the operational readiness of the key Rite Aid transitional IT systems," said Fairweather.
Walgreens will begin acquiring stores in phases with completion anticipated in spring 2018. Over time, Walgreens will transfer acquired Rite Aid stores onto Walgreens' existing IT systems prior to rebranding as Walgreens.
"To deliver the full benefit of the acquisition, we must, of course, fully integrate and rebrand the retained stores into the Walgreens network. This is a relatively complex, time-consuming and costly process," he followed.
The company expects to complete the integration of the acquired stores and related assets within the next three years. The acquisition-related costs of this are estimated to be approximately $750 million. In addition, Walgreens Boots Alliance plans to invest around $500 million in incremental capital expenditure on store conversions and related activities.