The owner of Boots is carving $1bn (£820m) of costs out of its business after a sales boost in the British pharmacy chain failed to buoy earnings as much as Wall Street expected.
Walgreens Boots Alliance unveiled plans to lower its capital expenditure by $600m and to cut at least $1bn worth of costs out of its business. It said this would “align our cost structure with our business performance”.
The upcoming cuts in costs will focus on US operations. However, in the UK, Walgreens earlier this year said it was planning to shut around 300 Boots stores by next June. It is aiming to get to 1,900 stores across the UK, from 2,200 in June this year. The retailer said this was because some stores were too close to others.
The plans for further cost-cuts come just weeks before Walgreens’ new chief executive, Tim Wentworth, takes the helm. The industry veteran, whose appointment was announced this week, is scheduled to take over on Oct 23.
Mr Wentworth taking up the post is expected to spark fresh questions over the future of the UK pharmacy chain. Speculation has been mounting in recent months over a potential break-up of the Walgreens business.
Walgreens had previously been considering a sale of Boots, but shelved the plan last year citing an “unexpected and dramatic change” in financial markets. Reports have suggested that executives have since been under pressure to accelerate a focus on the US and spin off its international operations. Mr Wentworth’s background is in the healthcare sector, having previously headed up pharmacy benefit manager (PBM) Express Scripts.
Announcing its results on Thursday, Ginger Graham, Walgreens’ interim chief executive, said: “We are also intently focused on accelerating our profitability in the US healthcare segment.”
Walgreens recorded a net loss of $3.1bn for its latest financial year, compared to $5.5bn a year earlier, although this was largely driven by a charge for opioid claims and litigation. Its fourth-quarter earnings of 67 cents a share missed analysts forecasts, and Walgreens issued profit guidance that was lower than Wall Street estimates. Revenues were up 9.2pc in the fourth quarter.
Its performance in the UK was stronger than elsewhere in the group. Boots posted a 11.7pc retail sales jump for the fourth quarter. Over the year to the end of August, sales were up 12.5pc across Boots.
The retailer said this was driven by an uptick in footfall in shopping centres and travel stores, even with cost of living pressures weighing on customers.
Seb James, Boots UK and Ireland managing director, said: “I am really encouraged to see continued strong performance as the work that we have done to expand our ranges, drive value and innovate in beauty seems to be resonating extremely well with customers.
“We have great plans for the year ahead including our new Beauty store in Battersea, a further extension of our beauty category, expansion of our online doctor service and much more.”
Sales in its latest quarter were spurred by customers buying more teeth-whitening products and skincare items. Boots attributed the rise to TikTok trends.