The Food and Drug Store powerhouse, Walgreens Boots Alliance, announced a scaled-down version of their original $9.4 billion dollar agreement with Rite Aid in September. Three distribution centers, 45% of the Right Aid fleet, and corresponding inventory is all part of the downsized $4.37 billion dollar purchase.
Soon after the acquisition with Rite Aid closes, Deerfield-based Walgreens is shutting down nearly 600 of the 1,900 Rite Aid stores it is taking ownership of. Walgreens is paying a ballpark figure of $500 million to convert the remainder of the bought out rival stores into Walgreens, and a one-time $325 million dollar termination fee to Rite Aid for the original merger that was abandoned. The effort is costly to Walgreens, but the projected savings turn out an annual $300 million by the end of 2020’s fiscal year, according to WBA’s Chief Financial Officer.
A Walgreens Boots Alliance representative says that the exact stores that are closing have not been decided on but the majority are Rite Aid locations, with possible Walgreens closures as well. The actual closings are taking an estimated year and a half with the affected stores primarily in the Northeast and Southern parts of the United States. To keep from overlapping, and competing with one another, the company is shutting down locations that have another store within a mile of each other.
The most recent fiscal quarter counts that comparable sale profits fell by 2.5%, and the closing keeps Walgreens Boots Alliance stores from unnecessarily competing with one another. Already, Walgreens has announced that there has been an improvement in the U.S. pharmacy unit of 7.5% over its previous year period, thus proving that their decision to consolidate is paying off.
How big of an impact do you think this merger is going to have on the American Food and Drug Store industry? What about the loss of jobs? Are pharmacy wait times going increase along with prices? Leave your feedback and thoughts on how you feel about Walgreens shutting down stores.