Walgreens Aims to Shutter 200 Stores while Opening 200 Other Stores

Walgreens Boots Alliance, the first global pharmacy-led, health and well-being enterprise in the world, announced Thursday it will close about 200 less-profitable U.S. Walgreens stores and open about the same number of stores in new locations. On a conference call, Alex Gourlay, executive vice president of Walgrrens Boots and president of Walgreens, said the stores will close during the next three years, with the last closing no later than the end of 2017 and will be replaced by about the same number of new stores

The list of stores slated to close is still being finalized.

The closings, announced along with quarterly earnings on Thursday, will expand a three-year, $1 billion cost-reduction plan announced last August. The company now plans to cut $1.5 billion by the end of 2017 by also reorganizing its corporate operations and streamlining its information technology and other functions.

“This really is (about) getting the right stores in the right places,” Gourlay said.

The store closings are just 2% of the 8,232 drugstores Walgreens has in the U.S., Puerto Rico and the Virgin Islands.

Walgreens expects pretax charges for the restructuring of between $1.6 billion and $1.8 billion.

Nonetheless, the marrying of the nation’s largest drugstore chain, Walgreen, and Europe’s largest pharmaceutical wholesaler, Alliance Boots, on Dec. 31, 2014 boosted the company’s second-quarter earnings across the board. Here’s how the quarter played out, and a bit on what’s to come:

The company was created through the combination of Walgreens and Alliance Boots in December 2014, bringing together two leading companies with iconic brands, complementary geographic footprints, shared values and a heritage of trusted health care services through pharmaceutical wholesaling and community pharmacy care, dating back more than 100 years.

Just by the numbers: Walgreens Boots earned $2.04 billion in the first quarter, or $1.93 per share, compared with $716 million a year earlier, or 74 cents per share. Sales were also up 35 percent to $26.57 billion from $19.61 billion a year earlier.

The adjusted earnings per share for the quarter, of $1.18, beat analyst estimates by 23 cents.

What’s new: Walgreens Boots Alliance now reports results in three segments: U.S. retail pharmacy, International retail pharmacy and pharmaceutical wholesale.

2015 moving forward: Walgreens Boots Alliance announced a 2015 full-year adjusted estimate for earnings per share between $3.45 and $3.65. Cost savings from the merger for the first half of its fiscal 2015 were $310 million. The company said it remains on track to save $650 million by the end of the year.

What’s next: Walgreens Boots will finalize the list of stores it will close and which new locations will replace them. The company also reaffirmed its 2016 adjusted earnings per share estimate of $4.25 to $4.60.

What else?: On Wednesday after the markets closed, Walgreens announced that U.S. Foods CEO John Lederer had been elected to its board to serve on its finance committee. From 2008 to 2010, Lederer was chairman of the board at Duane Reade, a New York-based pharmacy company acquired by Walgreen in 2010. His appointment was part of an agreement with activist investor group Jana Partners.

Walgreens also said Wednesday it will pay a quarterly dividend of 33.75 cents per share June 12 to shareholders of record as of May 21.

Quote you on that: “This quarter marked a solid start for our new company, and I remain as optimistic as ever about our long-term future,” said acting CEO Stefano Pessina. “At the same time, we understand the work that is needed to proactively address headwinds such as reimbursement pressure and competition.”

The company employs over 370,000 people and has a presence in more than 25 countries; it is the largest retail pharmacy, health and daily living destination in the USA and Europe. Including its equity method investments, Walgreens Boots Alliance is the global leader in pharmacy-led, health and wellbeing retail with over 13,100 stores in 11 countries. The company includes the largest global pharmaceutical wholesale and distribution network with over 350 distribution centers delivering to more than 200,000 pharmacies, doctors, health centers and hospitals each year in 19 countries. In addition, Walgreens Boots Alliance is the world’s largest purchaser of prescription drugs and many other health and wellbeing products.

Its portfolio of retail and business brands includes Walgreens, Duane Reade, Boots and Alliance Healthcare, as well as increasingly global health and beauty product brands, such as No7, Botanics and Soap & Glory. More company information is available at www.walgreensbootsalliance.com.