Dive Brief:

• In a bankruptcy auction last week, Walgreens took the highest number of Shopko pharmacy assets, or 63 stores, according to documents from the United States Bankruptcy Court For The District Of Nebraska. "We are pleased with the auction results and pending final approvals of the bankruptcy court look forward to welcoming patients to our pharmacies," a Walgreens spokesperson said in an email to Retail Dive.

• The bid, set to be approved by the court Monday, follows Walgreens' $165 million purchase in September of 185 Fred's pharmacy stores across 10 Southeastern states. 

• Other successful bidders included Rite Aid, which won five, CVS (13) and grocer Albertsons (seven). The agreements should generate some $52 million in auction proceeds for Shopko, according to reports cited by Wells Fargo analysts. Shopko didn't immediately return Retail Dive's request for comment.

Dive Insight:

Shopko's bankruptcy, which will entail the shuttering of stores, will also mean further consolidation in the pharmacy sector.

Last week Shopko put up for bid pharmacy assets, some of which were auctioned off, according to the documents. According to Wells Fargo, Shopko had previously unloaded the assets of about 80 stores. Kroger purchased the pharmacy records from 42 Shopko stores at the end of 2018, and during last week's auction also successfully bid for one store.

While there were several other takers at the auction last week, Walgreens was the day's winner, according to a note from Wells Fargo analysts emailed to Retail Dive. The moves from both Walgreens and CVS could result in new locations for those retailers, they also said.

Walgreens, which bought a slew of Rite Aid stores after an unsuccessful attempt to merge with its rival, is in a pitched battle with CVS as both move to provide more health care services as well as bolstering their pharmacy operations.

"While the purchases are a mix of inventory and file buys that should improve current [Walgreens] and CVS store pharmacy operations, we believe it is possible a few could become the basis for new locations," Wells Fargo said. "Regardless, we believe eliminating weaker pharmacy competitors, such as Shopko, helps the remaining chain store operators. At an average purchase price of $433,000 per store, the purchases seem in line with recent bankruptcy related file buys and about half of what [Walgreens] paid for the 185 Fred's Pharmacy store file buys late last year."

As they jostle for dominance in pharmacy and health care, though, both Walgreens and CVS have neglected their front-of-store operations. Both have taken steps to elevate their beauty sales to take advantage of that sector's strength, but their stores remain fairly unappealing at a time when mass merchants like Target and Walmart, which both include pharmacy services in most stores, have spiffed up stores and smoothed omnichannel operations to entice more shoppers.