According to media reports Thursday, Walgreens Boots Alliance will close about 200 U.S. stores, its biggest shuttering move ever, as it plans to increase its cost-cutting target by $500 million.
The drugstore chain said it would “reorganize corporate and field operations” and “streamline information technology and other functions.”
“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.”
In an email this morning, a Walgreens spokesman declined to say how many corporate jobs would be cut in the restructuring. The list of closing stores isn’t final, he said.
The moves will increase savings to $1.5 billion by the end of fiscal 2017, up from a previously announced $1 billion, the company said.
The closings represent a small percentage of the more than 8,200 stores in the U.S., Puerto Rico and the U.S. Virgin Islands.
“We are restructuring our cost base, with a focus primarily in the USA, to create a more efficient cost model and become a more agile company,” Executive Vice Chairman and Acting CEO Stefano Pessina said in a statement this morning announcing earnings.
“This quarter marked a solid start for our new company, and I remain as optimistic as ever about our long-term future,” he said in the statement. “At the same time, we understand the work that is needed to proactively address headwinds such as reimbursement pressure and competition. Our work includes several key areas of focus to create value.
“The first area is improving the performance of our businesses worldwide with an emphasis on operations. Second, we will be refreshing and reinvesting in the stores of our Retail Pharmacy USA division to improve the customer experience and expand retail margins.”
Meanwhile, the company forecast profit for its current fiscal year that may trail analysts’ estimates. Profit, excluding certain items, will be $3.45 to $3.65 a share, the company said. Analysts had estimated $3.60 on average, according to data compiled by Bloomberg.
Pessina, who took over when the company acquired Alliance Boots in December, has replaced executives and telegraphed his interest in U.S. deals. Rite Aid is seen as a possible target, Peter Drippe of Visium Asset Management said earlier this month.
Profit, excluding certain items, for the quarter that ended Feb. 28 was $1.18 a share. Analysts had estimated 95 cents on average, according to data compiled by Bloomberg. Revenue for the quarter was $26.6 billion. Analysts had predicted $27.6 billion.