Economy

Walgreens to Shutter Almost 600 Rite Aid Stores as Part of Megadeal

Walgreens to Shutter Almost 600 Rite Aid Stores as Part of Megadeal”

Walgreens Boots Alliance wba said on Wednesday it would close almost 600 of the 1,932 Rite Aid rad stores it is buying in a $4.375 billion cash deal set to close in the spring of 2018.

The Deerfield-based company will close stores, mostly Rite Aids, over an 18-month period, Walgreens Alliance Boots CFO George Fairweather said on an earnings call Wednesday, according to Crain's Chicago Business. The decrease in earnings reflects Rite Aid-related costs, mainly merger termination fees, Walgreens Boots said. Analysts expected earnings of $1.22 per share on $30.05 billion in revenue, according to Zacks Investment Research.

Walgreens (NASDAQ: WBA) secured regulatory approval under the Hart-Scott-Rodino Antitrust Act to close the Rite Aid deal in September.

Sales at Walgreens' U.S. pharmacies rose 12.6 percent in the fourth quarter ended August 31, after the company filled 250.2 million prescriptions, up 9 percent from a year ago.

Sales increased 5.3% to $30.15 billion versus the year-before quarter, and gained 6.4% on a constant currency basis compared with the prior-year period. That's a key metric for gauging a retailer's health because it excludes recently opened or closed stores. Comparable pharmacy sales increased 5.6 percent, primarily due to higher volume. This unhelpful hole in Walgreens' revenue line was plugged by a better performance from the USA division, where full-year sales increased by around 4%. The forecast was largely above analysts' average estimate of $5.47, according to Thomson Reuters I/B/E/S.

Walgreens will likely see a boost from its acquisition of 1,932 Rite Aid stores, which aren't yet reflected in its numbers, but that, too, will be a mixed bag in light of the $1.25 billion Walgreens has earmarked for the integration process. "However, it does not mean that the company can neglect the day-to-day running of the business", he said.

While some of Walgreens' retail weakness was inevitable as it pulled back from e-commerce, its brick-and-mortar performance remains "below par, especially in basic personal care and household essentials", he said.

The company intends to close stores within a mile of another Walgreens or Rite-Aid, a company spokeswoman said.

An enlarged fleet brings with it the question of optimization. The company expects the review to bring savings of about $300 million each year through 2020.

Walgreens said it expects 2018 adjusted earnings of $5.40 to $5.70 per share.



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