Walgreens to close 76 drugstores in 2014

Walgreens plans to close 76 of its drugstores nationwide between April and August 2014, which amounts to less than 2% of its stores, due to store density and non-optimal real estate, Walgreens President and CEO Greg Wasson, said during a conference call on March 25.

Twenty retail locations in the Northeast, 17 in the Midwest, 10 in the Southeast, 14 in the West, and six in the Southwest are planned to be closed as “part of its efforts to optimize the company’s asset base,” according to a company release.

Walgreens stated that it expects to offset the closures with an increase in its store count in fiscal 2014.

“While we seize the opportunity for store growth as the population ages and consumers look to community pharmacy for their healthcare needs, we also continue to focus on optimizing our assets and organization to position Walgreens for our future as a global company,” Wasson said.

In the second quarter of fiscal year 2014, the company added 28 new drugstores by acquisition or building new facilities. Walgreens has more than 8,200 drugstores in the United States as of the end of February, which is 138 more than last year.

By closing 76 stores in the second half of fiscal year 2014, Walgreens expects to benefit from $40 to $50 million in annual operating revenue in fiscal 2015. Approximately $240 to $250 million in charges is expected to occur in the third and fourth quarters of 2014, the company announced.

Second quarter results

Walgreens had solid second quarter sales growth of 5.1% for a record $19.6 billion, and the first half sales for fiscal 2014 increased 5.5% to $37.9 billion. Also, front-end sales did well, increasing 2% in the second quarter. Although customer traffic was down 1.4%, the basket size increased 4.3%.

Prescription sales increased 7% in the second quarter, higher than comparable stores at 5.8%. In the second quarter, Walgreens dispensed 214 million prescriptions, which was almost 3% more than a year ago. Prescriptions filled in comparable stores only increased 2.2% in the second quarter.

“Walgreens also saw strong growth in prescriptions filled for Medicare Part D patients, which increased 16% in the second quarter compared with last year’s quarter, which the company’s Part D market share increased 0.8 percentage point in February compared with the same month a year ago,” the company said.

Walgreens also administered 8.6 million immunizations in the first half of the fiscal year, more than a 10% increase over the last year.

“Pharmacy gross profit dollars were primarily impacted by the shift in the generic drug wave from a peak in the prior year to a trough in the first half of fiscal 2014. A less severe flu season in this year’s second quarter compared with a year ago also negatively impacted pharmacy gross profit dollar growth. Front-end margins decreased as the company invested in promotions,” Walgreens said.

Its Balance Reward loyalty program reached more than 100 million enrollees and nearly 80 million as active members in the second quarter.