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Walgreens To Shutter 200 Stores, Cites Optimization

Walgreens Boots Alliance, parent of drugstore giant Walgreens, is planning to close about 200 U.S. Walgreens stores as part of its continuing effort to cut costs. The company didn't release the locations of the stores or an exact timetable for their closure.


According to the company, the closures are the latest part of its optimization program, which it calls a “transformation cost management program” that aims to reduce the number of stores in proximity to each other, among other cost-cutting goals.

The closures will come in addition to the previously announced paring of the number of Boots locations in the U.K. by about 200 stores, which will be shuttered for similar reasons. Most of the British stores on the chopping block are within walking distance of another, more profitable Boots location. 

Walgreens has also closed more Rite Aid locations than expected. The company acquired 1,932 Rite Aid stores and planned to close up to 600, but raised that number to 750 in April, as it accelerated the development of smaller-store formats, Forbes reports.

The company currently estimates that the cost management program will result in pretax charges of about $1.9B to $2.4B, including the costs associated with terminating leases and severance for employees, Walgreens said in a filing with the Securities and Exchange Commission

In its third fiscal quarter of this year, Walgreens Boots Alliance reported that sales were up 0.7% to $34.6B compared with a year earlier, but earnings were down 23.6% to $1B compared year over year, while earnings per share decreased 16.5% to $1.13.

The company's cost-cutting program, which began early this year, will help drive structural change, Walgreens Boots Alliance CEO Stefano Pessina said during the company's most recent earnings call in June. The program, he said, will make the company a more efficient and responsive organization.

"[The program] is expected to provide a significant portion of the funding required for our major technology upgrade and development investments," Pessina also said.

Walgreens is eager to make tech updates at its locations in order to stay competitive with the likes of Amazon, which got into the consumer pharmacy business about a year ago after the acquisition of online pharmacy PillPack.

Based in Manchester, New Hampshire, PillPack delivers prescriptions to customers and manages refills automatically. It packages pills based on the day they are supposed to be taken, rather than the specific medication.

Three years ago, the Deerfield, Illinois-based Walgreens similarly closed about 200 U.S. locations, right after its acquisition of European chain Alliance Boots. Even so, at more than 9,500 locations, Walgreens remains the largest drugstore chain in the U.S., ahead of rival CVS' 6,200 stores.