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Future of WV Rite Aid stores up in air after Walgreens deal

Charleston Gazette-Mail

Where there’s a Rite Aid pharmacy in West Virginia, chances are, there’s a Walgreens pharmacy not too far away.

The Walgreens on Washington Street West in Charleston is flanked by two Rite Aid pharmacies: one half a mile east, one a mile west. In Teays Valley, Rite Aid and Walgreens are less than half a mile from each other. In Barboursville, U.S. 60 separates them. In Cross Lanes, they face each other across Goff Mountain Road.

But after federal regulators accepted a deal for Walgreens to buy 1,932 Rite Aid stores, and reports that Walgreens will close 600 stores within the next 18 months, this overlap likely won’t last much longer.

All 103 West Virginia Rite Aid stores are among those sold to Walgreens, a company spokeswoman confirmed last week. Walgreens has said most of the stores it will close will be Rite Aid stores within a mile of a Walgreens, once the deal is made final.

Stores will begin closing next spring and continue over the next 18 months, company spokeswoman Fiona Ortiz said.

West Virginia’s Rite Aid/Walgreens situation isn’t unique. Nationwide, roughly 37 percent of Walgreens and Rite Aid stores are within three miles of their counterpart, with about 20 percent of stores being less than a mile from the other, according to a report from commercial real estate firm Calkain Companies.

“In many cases, it’s the same location logic that banks and restaurants use — customer demographics, population density, ease of access and visibility,” David Dawley, director of the Robbins Center for Global Business and Strategy at West Virginia University, said of the two companies’ tendency to brush up against each other.

Walgreens only recently became acquainted with the Mountain State, opening its first West Virginia store in Morgantown in 2006. Out of 8,100 Walgreens stores nationwide, just 15 stores are in West Virginia — but the Rite Aid deal, once finalized, will bolster those numbers.

Rick Marshall, a regional director of the Retail, Wholesale and Department Store Union, which represents Rite Aid workers in West Virginia, said store closings are never an attractive option for a business or its employees. But more Rite Aid workers may be saved in the long run by Walgreens’ acquisition, as Rite Aid has weathered “troubles upon troubles,” he said.

“If you look at it in the grander picture, Rite Aid was going to close a lot of stores without this [deal],” Marshall said. “The bottom line is, this may have saved jobs.”

But Dawley says the long-term picture will see Walgreens and CVS Pharmacy, its remaining major competitor, “continue to grow in size at the expense of others,” including Rite Aid and its remaining stores. That will lead to fewer jobs in the industry, he said.

In Rite Aid’s most recent Form 10-K filing with the U.S. Securities and Exchange Commission, it said customers may be inclined to make purchases or fill prescriptions at a competitor due to uncertainties surrounding Rite Aid and its future after the deal.

Marshall said the RWDSU will begin negotiations with Walgreens once the deal is finalized. Details on how exactly the deal will affect employees remain scarce, he said.

Regulators accepted the $4.375 billion deal in September, after two years of Walgreens vying for bigger deals, including an initial push to buy Rite Aid outright.

For Walgreens, the deal gives it the edge over fellow pharmacy giant CVS in terms of store locations, Dawley said.

In a news release, Stefano Pessina, executive vice chairman and CEO of Walgreens holding company Walgreens Boots Alliance, called the deal “a significant moment for our company” and said it would broaden the company’s reach to more neighborhoods across the country.

Rite Aid, on the other hand, can tap into Walgreens’ network of suppliers for prescriptions and other goods through the deal, Dawley said.

“This cuts Rite Aid’s costs and keeps them competitive,” Dawley said.

Rite Aid is expected to use “a substantial majority of” the billions it will receive to pay off existing debt, the company said in a news release. Chairman and CEO John Standley said in the release that the improved financial flexibility will allow Rite Aid “to deliver improved results.”

Customers should see minimal issues in the transition of Rite Aid stores, and Walgreens is experienced when it comes to acquisitions, Dawley added. Walgreens said it will convert Rite Aid stores to the Walgreens brand “in carefully planned phases over time.”

But Dawley said it’s very likely Rite Aid stores close to a Walgreens store won’t be around for long. The Calkain report pens most West Virginia Walgreens and Rite Aid stores close to each other along Interstate 64, in Charleston, Huntington or somewhere in between.

Once stores close, their locations may be acquired by CVS or other retailers with a presence in the area, according to the Calkain report. CVS has several West Virginia locations, including three in Charleston.

Read the full story at wvgazettemail.com

Traci BidingerFuture of WV Rite Aid stores up in air after Walgreens deal

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