Walgreens swings to $1.7 billion quarterly loss; slashes jobs in the U.K.

Marianne Wilson
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Walgreens Boots Alliance reported a big third-quarter loss as its profits were hurt by plunging sales in its U.K. division and COVID-related expenses, including increases costs for store cleaning. 

The company, which previously announced an ambitious cost-cutting initiative, raised its annual cost-savings target to more than $2 billion by 2022. (The previous target called for savings in excess of $1.8 billion by 2022.) Walgreens also said it plans to eliminate more than 4,000 jobs in its Boots and Boots Opticians divisions in the U.K., where it is closing 48 optician centers.

The drug store company posted a net loss of $1.71 billion, or $1.95 per share, for the quarter ended May 31, compared to net income of $1.03 billion, or $1.13 per share, in the year-ago period. The loss included $0.61 cents to $0.65 per share in COVID-19-related costs and impacts. Adjusted EPS came in at $0. 83 cents. 

Sales edged up to $34.63 billion from $34.60 billion, beating analysts’ estimates of $34.30 billion. Walgreens said COVID-19 impacted its sales by $700 million to $750 million, which was almost entirely due to a decline in its non-U.S. business. Globally, pharmacy volume was impacted by a drop in doctor visits and hospital patient admissions.
The most significant decline was in the U.K., where traffic at Walgreens’ Boots stores fell about 85% in April.  

“While most Boots stores remained open throughout the U.K. lockdown to provide communities with pharmacy and essential healthcare, our largest premium beauty and fragrance counters were effectively closed,” the company stated. “More than 100 stores, mainly in high street, station and airport locations, were temporarily closed as were nearly all of the 600 Boots Opticians stores.”

In the U.S., total same-store sales rose 3%, with same-store pharmacy sales rising 3.5%. Retail same-same store sales rose 1.9%.

"Shopping patterns are evolving more rapidly than ever as consumers further embrace digital options, spurring us to accelerate our ongoing investments in digital transformation and neighborhood health destinations," said CEO Stefano Pessina. 

The efforts include the expansion of Walgreens’ partnership with VillageMD by which the retailer will open doctors’ offices in hundreds of its stores and a deal with Microsoft and Adobe Inc. to launch a personalized omnichannel healthcare and shopping experience.