Walgreens Boots to close 200 stores

1 min readUpdated Apr 13, 2015Apr 13, 20154:00 AM

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Drugstore giant Walgreens Boots Alliance says it plans to close 200 US Walgreens stores during the next 30 months as it reduces overheads.

But the 8232-strong network in the US and territories will not be shrinking – the company has promised the same number of new locations will be opened during the same time as it plugs obvious gaps in its network footprint.

The Chicago Tribune newspaper reports that the locations of the stores facing closure has yet to be confirmed and the company declined any further comment.

After Boots and Walgreens merged, the new company last August announced a program to cut US$1 billion in costs. This week it has expanded that target to $1.5 billion by the end of 2017, with plans to streamline its IT functions and reorganise corporate operations.

Alex Gourlay, executive vice president of Walgreens Boots and president of Walgreen, told an analysts conference call that the store closure and opening plan is about “getting the right stores in the right places”.

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What this means

Walgreens' strategy of closing and immediately replacing 200 US stores is a bold attempt to optimise its vast footprint rather than shrink it. This proactive network rationalisation, aiming for 'the right stores in the right places', signals a push for efficiency, similar to how other brands like Tiffany & Co. And Chagee Holdings strategically expand into new Asian markets rather than merely adding stores. By streamlining IT and corporate operations, Walgreens aims to achieve a $1.5 billion cost saving, which will undoubtedly pressure rivals to re-evaluate their own operational inefficiencies. The risk lies in execution; if new locations fail to deliver improved performance, the entire exercise becomes a costly distraction. We should watch the reported profit growth in their next quarterly earnings.

Minjun Park

Questions & Answers

Will the total number of Walgreens stores in the US decrease after these changes?

No, the company has pledged to open the same number of new stores as it closes. This strategy aims to maintain the network's overall size while optimising its geographical spread across the US and its territories.

What is the primary reason given for closing 200 US Walgreens stores?

The closures are part of a broader plan to reduce overheads and achieve cost savings for Walgreens Boots Alliance. The company aims to ensure it has the correct stores in the most suitable locations.

Has Walgreens Boots Alliance increased its cost-cutting targets since the merger?

Yes, the company initially announced a target of US$1 billion in cost reductions last August. This week, that target has been expanded to US$1.5 billion, to be achieved by the end of 2017.

What other measures are included in the expanded cost-cutting programme?

Beyond the store changes, the expanded programme includes plans to streamline IT functions across the business and reorganise corporate operations. These actions contribute to the US$1.5 billion savings target.

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