Rite Aid plans to close 900 stores over next five years

Rite Aid (RAD), the nation’s largest traditional pharmacy chain, said Monday it plans to close more than 900 drugstores over the next five years, reversing a move to expand its store count.

Under the first phase of the plan, Rite Aid said it will close 39 company-owned stores and either franchise or sell other 87 stores.

The company also plans to close up to 47 distribution centers and up to 15 store filling centers. The closures are expected to be completed by 2020.

The company expects to cut total operating costs by $1.5 billion annually, largely by focusing on maximizing its pharmacy business, while reducing costs for parts of its business such as store operating expenses and supply chain logistics.

Rite Aid, whose drugs and services have been in some danger since 2014 when Walgreens Boots Alliance, Inc. (WBA) tried to buy the company, initially did not support the merger. But then in 2017, Rite Aid agreed to sell more than 2,000 drugstores to Walgreens for more than $4.38 billion in a deal approved by the antitrust agency in 2017.

To get the deal done, Walgreens agreed to pay Rite Aid $325 million for pre-packaged goods or supplies from 14 pharmacies owned by Rite Aid that were being sold. The deal resolved allegations from federal antitrust officials that Rite Aid had agreed to discounts on the pre-packaged goods that were not possible for the company, and resulted in a new inventory for Rite Aid stores.

The deal boosted Rite Aid’s financial performance. Shares were up 32% on Monday, before the company announced the plan to close more stores.

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