Walgreen Co. will close 200 drugstores nationwide in what a spokesman Thursday called a “significantly” higher number than in years past, and will open a similar number in more-profitable locations.
“We’ve done a thorough analysis and we’re being more aggressive” about closing unprofitable stores, said Michael Polzin, a spokesman for the Deerfield-based drugstore giant.
A list of the stores to be closed has not been finalized, but they are scattered throughout the country, Polzin said.
The closings are part of a $1 billion cost-reduction plan announced last August and overseen by new management after Walgreen’s $16 billion purchase of European health and beauty retailer Alliance Boots. The company is now called Walgreens Boots Alliance Inc.
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In the past, Walgreen closed a “few dozen” stores each year, Polzin said.
The company’s 200 new stores are in line with its typical opening of between 150 and 200 stores each year, Polzin said.
“We continue to take advantage of locations that make sense and that we think are good opportunities,” he said. No list of new store sites was available.
Walgreen officials also said Thursday the company will reorganize its corporate operations and streamline its information technology and other functions. It expects the moves to yield an additional $500 million in cost savings.
The store closings amount to about 2 percent of the 8,232 drugstores it runs in the United States, Puerto Rico and the U.S. Virgin Islands.
Executive vice chairman and acting CEO Stefano Pessina said in a statement he remains “as optimistic as ever” about the company’s future, but they need to address challenges such as growing pressure on reimbursement for pharmaceuticals and competition.
Drugstore chains such as Walgreens and CVS Health Corp. have been seeing growing pressure not only from each other but also from grocery stores and retailers such as Target and Wal-Mart, which are expending their pharmacy operations.
Analysts expect Walgreen will get added negotiating muscle over supplies such as pharmaceuticals from the Alliance Boots deal and an ownership stake it acquired in pharmaceutical wholesaler AmerisourceBergen Corp. But the drugstore chain disappointed investors last August when it also lowered a forecast for earnings it expects after combining with Alliance Boots.
Walgreen said Thursday it earned $2.04 billion, or $1.93 per share, in its fiscal second quarter ended Feb. 28. Earnings, adjusted for one-time gains and costs, were $1.18 per share.
That topped Wall Street expectations. The average estimate of 14 analysts surveyed by Zacks Investment Research was for earnings of 94 cents per share.
But the drugstore chain’s revenue of $26.57 billion fell short of analysts’ forecasts for $27.73 billion.
Walgreen forecast full-year earnings of between $3.45 and $3.65 per share. Analysts expect, on average, earnings of $3.62 per share, according to the data firm FactSet.
Pessina replaced Greg Wasson as CEO after the company completed the Alliance Boots combination. Walgreen said Thursday it was still searching for a permanent replacement.
Mark Miller, a retail analyst with Chicago-based William Blair & Co., said the new management is focusing on greater efficiency and accountability, and he believes operations are stabilizing.
Contributing: The Associated Press
