CAMP HILL, Pa. — Rite Aid Corp. expects to strengthen its store base with the sale of nearly 2,200 units to Walgreens Boots Alliance Inc. (WBA).
In a filing with the Securities and Exchange Commission, Rite Aid said it would have 2,336 stores following the sale, compared with 4,522 currently. The chain said that its store portfolio will be higher performing in both the front end and the pharmacy. Average sales per store for Rite Aid after the transaction will be $6.11 million ($4.13 million from pharmacy and $1.98 million from the front end), compared with the current $5.74 million ($3.92 million from pharmacy and $1.81 million from the front end). The average weekly prescription count per store is pegged at 1,385 following the transaction, versus 1,277 for the present store base.
Of the outlets the chain is keeping, 1,337 (57%) are Wellness stores, versus 2,417 (53%) in the current portfolio. Company executives have said that, compared with other Rite Aid locations, Wellness stores have shown an approximately 1% higher prescription count and more than 3% higher front-end sales.
The remaining store base — which is concentrated on the West Coast and in Pennsylvania, Ohio, Michigan and New Jersey — “is a financially stronger group of stores on a per-store basis than the store base today,” chairman and chief executive officer John Standley told analysts after Rite Aid and WBA announced the sale and the termination of their planned merger. “We will have higher average front-end sales, script count and EBITDA per store. Almost 60% of the stores have been remodeled to our groundbreaking Wellness format, and these stores are in cities and communities where we have strong market share and are very competitive.”
Under the new agreement, WBA is buying 2,186 stores, three distribution centers and related inventory from Rite Aid for $5.175 billion in cash. WBA also agreed to pay Rite Aid a breakup fee of $325 million. The deal would leave Rite Aid with stores in 28 states, compared with its current trade area of 31 states and the District of Columbia. It would exit Indiana, South Carolina, Utah and Washington, D.C.
Rite Aid said it plans to use $4.92 billion of the $5.5 billion in proceeds from the deal to pay down debt. For its 2017 fiscal year ended March 4, Rite Aid had total debt of about $7.3 billion.