DEERFIELD, Ill. — Walgreens Boots Alliance (WBA) will shutter an additional 300 Boots outlets in the U.K. and 150 Walgreens stores, and cut hours at other U.S. stores, global chief financial officer James Kehoe said during a conference call discussing third quarter results.
The actions are among “cost-saving initiatives” that Kehoe noted after the company reported mixed results for the quarter, beating analysts’ sales estimates but falling short of profit expectations.
The moves follow WBA’s elimination this year of more than 500 office jobs, or around 10% of its corporate and U.S. support office workforce. The company in 2019 had announced 200 Walgreens store closures.
Sales for the period ended May 31 advanced 8.6% from the year-ago quarter to $35.4 billion, topping Wall Street’s forecast of $33.79 billion. But adjusted earnings per share came in at $1.00, missing analysts’ predicted $1.06.
The company lowered its outlook for full-year adjusted EPS to $4.00 to $4.05 from its previously expected $4.45 to $4.65, reflecting challenging consumer and macroeconomic conditions and lower COVID-19 vaccine and testing volumes.
“WBA achieved 8.9% constant currency sales growth in the third quarter despite a challenging operating environment. Consumers continue to appreciate the value, convenience and range of services provided by Walgreens and Boots. However, significantly lower demand for COVID-related services, a more cautious and value-driven consumer, and a recently weaker respiratory season created margin pressures in the quarter,” said chief executive officer Roz Brewer. “Our revised guidance takes an appropriately cautious forward view in light of consumer spending uncertainty, while still demonstrating clear drivers of a return to operating growth next fiscal year. We are raising our cost savings program target to $4.1 billion and taking immediate actions to optimize profitability for our U.S. Healthcare segment. I am confident that our turnaround strategy positions WBA to drive sustainable core growth and deliver long-term shareholder value.”
The third quarter sales increase reflected growth in the U.S. retail pharmacy and international segments and a significant contribution from the U.S. Healthcare segment.
Operating loss was $500 million in the third quarter compared to a loss of $300 billion in the year-ago quarter. Operating loss in the quarter reflects a $431 million noncash impairment of pharmacy license intangible assets in Boots UK. Adjusted operating income was $1.0 billion, an increase of 0.6% on a constant currency basis, reflecting improvements in U.S. core pharmacy and International growth, partly offset by lower volumes of COVID-19 vaccinations and testing, planned payroll investments in U.S. Retail Pharmacy, and investments in U.S. Healthcare.
Net earnings in the third quarter were $118 million compared to $289 million in the year-ago quarter, primarily driven by lower operating income. Adjusted net earnings were $860 million, up 3.4% on a constant currency basis, primarily driven by adjusted operating income.