Walgreens Boots Alliance will shutter 150 U.S. Walgreens stores and 300 UK-based Boots locations as part of cost-cutting efforts, according to company officials on the pharmacy giant’s Q3 2023 earnings call. The specific stores that will be targeted have not been announced, but the U.S. locations are expected to close by the end of August 2024.
The closures are part of Walgreens’ plan of “accelerating our portfolio optimization to further simplify the business,” according to CFO James Kehoe. This effort also included selling 10.8 million shares of Option Care Health for proceeds of approximately $330 million to help Walgreens pay down debt and support its broader healthcare transformation.
Additionally, the retailer has been experiencing lower demand for COVID-related services, which, combined with more cautious customers and a “weaker respiratory season” has put pressure on the retailer’s margins, according to CEO Rosalind Brewer. As a result, the company raised its cost savings program target to $4.1 billion and started taking immediate actions to optimize profitability for its U.S. Healthcare segment.
Walgreens’ business results were mixed for the quarter. Sales for Q3 2023, which ended May 31, increased 8.6% year-over-year to $35.4 billion. However, operating losses grew to $500 million in Q3 2023 compared to a loss of $333 million in Q3 2022. Comparable pharmacy sales increased 9.8%, driven by branded drug inflation, while comparable retail sales excluding tobacco increased 0.2%.
The retailer is planning to lay off 504 corporate employees, or approximately 10% of its corporate workforce, with the majority of cuts coming from its Deerfield, Ill. headquarters or Chicago office. The layoffs are being made “to drive sustainable cost savings to help fuel investments for future growth,” according to an internal memo from CEO Rosalind Brewer seen by the Chicago Sun-Times.
Additionally, Walgreens will pay out $500 million to New Mexico and $230 million to San Francisco as part of settlements regarding the ongoing opioid crisis. The retailer also is facing a $200 million lawsuit filed by in-store digital media startup Cooler Screens for an alleged breach of contract.