Walgreens Halts Buybacks, Cuts 4,000 Jobs -- WSJ
July 10 2020 - 3:02AM
Dow Jones News
By Sharon Terlep and Micah Maidenberg
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 10, 2020).
Walgreens Boots Alliance Inc. said it plans to cut about 4,000
jobs in the U.K. and suspend stock buybacks as demand fell off in
its international business during the drugstore chain's latest
quarter.
The pharmacy chain on Thursday said the coronavirus pandemic
sliced out around $700 million to $750 million in sales for its
quarter ended May 31, with most of the impact tied to its
retail-pharmacy business overseas.
A "dramatic reduction" in customer traffic, including an 85%
decline in April, weighed on demand for its Boots U.K. stores,
Walgreens said. The company said it recorded noncash impairment
charges of $2 billion tied to the Boots U.K. unit.
Shares of the pharmacy chain fell more than 9% in early trading
Thursday.
The job cuts in the U.K. will impact about 7% of its workforce
there and less than 1% of its global staff, and will include
closing 48 Boots opticians and a 20% head-count reduction in the
company's U.K. support offices.
Boots, a big seller of upscale health and beauty products as
well as a pharmacy and eye-care chain, has been a lucrative
business for Walgreens, which has struggled in the U.S. amid
smaller revenue for prescription drugs and competition from online
retailers.
Walgreens acquired Boots Alliance in 2014, two years after
taking a 45% stake in the company, which also is Europe's largest
pharmaceutical wholesaler.
Boots comprises most of Walgreens' international retail and
pharmacy business and is concentrated in the U.K., where it has
nearly 2,500 retail outlets and 600 opticians. Walgreens has
another 2,100 stores outside the U.S. in countries including
Mexico, Chile and Thailand.
Overall, the international unit generated 8% of the company's
revenue and 15% of its gross profit last fiscal year.
Foot traffic "ground to a virtual halt," in Walgreen's U.K.'s
Boots business, Walgreens finance chief, James Kehoe, said Thursday
in a call with investors.
Sales fell 70% for the company's 600 U.K. optician locations,
which typically generate around $500 million in sales but were
largely closed amid the pandemic.
Overall, Walgreens swung to a loss of $1.71 billion, or $1.95 a
share, for its latest quarter, compared with a year-earlier profit
of $1.03 billion, or $1.13 a share. Its adjusted profit fell to 83
cents a share and was short of expectations.
The company generated $34.6 billion in sales, roughly flat year
over year. Analysts polled by FactSet had predicted $34.3 billion
in sales for the latest period.
In the U.S. retail unit, sales rose about 3% from a year earlier
to $27.4 billion. Pharmacy sales were up 4.6%, while prescriptions
filled in the third quarter decreased 1.3%.
Walgreens has been cutting costs in its home market and last
year it announced plans to close 200 U.S. stores.
The Covid-19 pandemic has been challenging for drugstores, as
patients put off visiting doctors and other health providers.
Walgreens is part of a coalition of health-focused companies that
is paying for advertisements that encourage people to return to
their medical providers.
"Globally, pharmacy volume was impacted by a drop in doctor
visits and hospital patient admissions," the company said.
Walgreens is working with and investing in primary-care provider
VillageMD to open 500 to 700 doctors' offices in its
drugstores.
Rival CVS Health Corp. is developing so-called health-care hubs
in its stores, offering a range of medical services. Walmart Inc.
is also adding clinics to its locations.
Write to Sharon Terlep at sharon.terlep@wsj.com and Micah
Maidenberg at micah.maidenberg@wsj.com
(END) Dow Jones Newswires
July 10, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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