Walgreens to close 200 stores, boost cost cutting

Kaja Whitehouse | USA TODAY

Drugstore chain Walgreens Boots Alliance (WBA) announced plans to close about 200 U.S. stores as part of its first earnings report since it merged with European drug retailer Alliance Boots last year.

Walgreens, the largest U.S. drugstore chain, said it will close the stores amid plans to boost its previously announced cost-cutting initiative by $500 million.

Walgreens expects to reduce costs by a projected $1.5 billion by the end of fiscal 2017, the company said.

"After a rigorous analysis, the company has identified additional opportunities for cost savings, primarily in its Retail Pharmacy USA division," the company said Thursday. "Significant areas of focus include plans to close approximately 200 USA stores; reorganize corporate and field operations; drive operating efficiencies; and streamline information technology and other functions."

Walgreens' spokesman Philip Caruso said the company has not yet decided which stores it will close, but it is "not focusing on any specific geographic area." Caruso also said there is "no hard timeline" for when the stores will be closed during the period for cost cutting.

The soon-to-be closed stores make up roughly 2% of the Walgreens' 8,232 drugstores in the United States, Puerto Rico and the U.S. Virgin Islands. Walgreens also said it opened 71 new drugstores in this region in the first half of fiscal 2015, including 25 relocations.

Store closings aside, Walgreens wowed shareholders with strong earnings. Shares jumped $4.94, or 5.6%, to $92.62.

Walgreens said adjusted second-quarter net earnings increased 33.2% to $1.2 billion. Second-quarter sales, meanwhile, increased 35.5% to $26.6 billion.

The U.S. retail pharmacy division, which includes Walgreens and Duane Reade stores, posted sales in the second quarter of $21 billion, up 7.4% over the year-ago quarter. Total sales in stores open at least a year were up 6.9% over the same quarter a year ago.

In December, Walgreens closed on a deal, valued at close to $16 billion, to purchase the remaining stake of European health and beauty retailer Alliance Boots that it didn't already own. The new company, which includes more than 12,800 stores in 11 countries, was renamed Walgreens Boots Alliance Inc., and it took on ticker symbol WBA.