Walgreens to shutter 600 Rite Aid stores in mega deal

Walgreens Boots Alliance said yesterday that it would shutter around 600 of the 1,932 Rite Aid stores it is buying in a $4.375 billion cash deal expected to close in the spring of 2018.

Two years ago the company had planned to buy smaller rival Rite Aid complete with its 4,500 stores but in the face of anti-trust regulators baulking in June, instead settled for a downsized deal announced in September. A number of Walgreens stores are also in the process of being shuttered.(See: Walgreens to buy smaller drugstore rival Rite-Aid for $9.4 bn)

According to executives, the locations being closed were chosen due to overlap with another Rite Aid or Walgreens location.

''The vast majority being closed are within one mile of another drugstore that we own going forward,'' Alexander Gourlay, WBA's co-chief operating officer, told Wall Street analysts on a conference call to discuss its latest quarterly results. The closings will take about a year and half and begin soon after the closure of the deal.

According to commentators, the rationale behind the move seems to be sound as comparable retail sales fell 2.1 per cent in its most recent quarter. The company does not need more of its own stores competing with each other.

Meanwhile, Walgreens' forecast for 2018 has exceeded analysts' predictions.

Walgreens shares shot over 4 per cent early yesterday, after the company said it expects 2018 adjusted earnings per share in the range of $5.40 and $5.70. According to FactSet, analysts had forecast on average $5.45 per share.

Walgreens attributed a 22-per cent drop in fiscal fourth quarter earnings, which fell to $802 million from $1.03 billion to termination fees and costs related to its pursuit of rival Rite Aid Corp.

The company first sought to buy Rite Aid in 2015, but regulators frowned at a combination of the nation's largest and third-largest drugstore chains, and the $9.4 billion bid languished for over a year before Walgreens ended it in June.