Walgreens Boots Alliance will close another 200 Walgreens drugstores in the U.S. on top of the 200 Boots pharmacies the global retail pharmacy chain already said it would shutter in the United Kingdom, the company disclosed.
The new closures, which will result in a hit to Walgreens earnings of at least $1.9 billion, is part of a global “transformation cost management program” launched earlier this year that has figured in hundreds of store closures across the U.S.
“Following a review of the real estate footprint in the United States . . . the company also plans to close approximately 200 locations in the United States,” Walgreens said in a filing with the U.S. Securities & Exchange Commission late Tuesday. “The company currently estimates that the transformational cost management program will result in cumulative pre-tax charges to its GAAP financial results of approximately $1.9 billion to $2.4 billion, of which $1.6 billion to $2.0 billion are expected to be recorded as exit and disposal activities.”
Earlier this summer, Walgreens disclosed plans to close 200 U.K. stores and consolidate them with other Boots locations comes after a decision announced earlier this year to shutter more Rite Aid drugstores in the U.S. than originally anticipated. Walgreens initially purchased 1,932 Rite Aid stores and planned to close up to 600, but that number is growing to 750, executives said in April.
To counter reimbursement pressures and competition for brick and mortar retailers from online giants like Amazon, Walgreens is spending hundreds of millions of dollars on “updating” its systems and infrastructure. In the U.S., Walgreens capital spending includes integration costs through the end of fiscal 2020 of converting Rite Aid stores it purchased in the last two years into Walgreens.
Walgreens and rival CVS Health, which announces its second quarter earnings Wednesday, are trying to reconfigure their U.S. stores, adding more healthcare services as a way to boost store traffic.
“Most importantly, this program will help drive a structural change in the company, making us a more efficient, more agile and more responsive organization,” Walgreens Boots Alliance chief executive officer Stefano Pessina told analysts on the company’s fiscal third quarter earnings in June in regard to the transformational cost management program.
“It is expected to provide a significant portion of the funding required for our major technology upgrade and development investments,” Pessina said in June. “And, of course, an element of it will help to give us a bridge in our financial performance, as we restructure our businesses to better meet the needs of an ever more rapidly changing market.”
Date: August 08, 2019