Walgreens, Rite Aid consolidation to provide new opportunities for rivals?

Ron Goldstone

Ron Goldstone

by Dan Rafter

It’s uncertain how many drug stores across the Midwest will close if Walgreens eventually buys its smaller rival Rite Aid. But Ron Goldstone, senior vice president of retail with Southfield, Michigan-based Farbman Group, says that the deal will bring plenty of opportunities for rival retailers looking for prime corner locations.

The reason? The consolidation between the two drugstore giants will certainly result in store closings. And some of these closings might be on prime corners across the country.

“When you have change, it always creates real estate opportunities,” Goldstone said. “For many years, the drugstore operators were fighting each other to get control of prime corners. With a consolidation between two of the substantive players, it will free up corners for other retailers to pursue.”

It might be rare to find a Rite Aid and Walgreens kitty-corner from each other. But it’s not unusual to find the rivals in prominent locations a mile or so apart, Goldstone said. Walgreens, then, if it does close its deal with Rite Aid, will certainly close several prime locations that will become redundant.

This will give retailers the chance to upgrade to corner locations when in the past they had to settle for less-desirable mid-block spaces, Goldstone said.

“I am a firm believer that competition is good,” Goldstone said. “Consolidation could breed new opportunities for more competition. That change can be good.”

Walgreens Boots Alliance, the parent company of Walgreens, in late October said it plans to buy Rite Aid for $17.2 billion, including debt.

The acquisition, of course, is far from final. U.S. regulators must still approve it. If the deal goes through, the new combined company would boast 12,800 U.S. locations. This would boost it past chief rival CVS Health. CVS has been busy, too. The chain is in the middle now of buying Target’s 1,700 pharmacies.

Walgreens now operates about 8,200 stores, while Rite Aid runs about 4,600.

Garrick Brown, vice president of research with Cushman & Wakefield, said that Walgreens might close thousands of stores as part of the deal. Brown wrote that Walgreens could close or sell 1,000 stores before the deal is finalized and up to 2,000 more after.

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