Walgreens Swings To Loss On $2bn Boots UK Charges, Suspends Share Buybacks
Published on Jul 10 2020 5:50 AM
Walgreens Boots Alliance Inc on Thursday swung to a loss in the third quarter and suspended share buybacks, as the COVID-19 crisis further weighed on its trouble-laden Boots UK division, leading to a $2 billion non-cash impairment charge.
Shares of the drugstore chain were down nearly 5% in trading before the bell.
The Boots division has been a sore point for Walgreens, which has been trying to revive the ailing business through cost-cutting measures. On Thursday, the company announced another round of job cuts and store closures.
Walgreens said it plans to close 48 Boots Opticians stores and cut headcount in its UK support office by 20%, a move that could impact more than 4,000 employees or 7% of its workforce.
Aside from Boots, lower reimbursement rates for prescription drugs, low generic drug prices and competition from online retailers have also dealt a blow to Walgreens, forcing it to launch a cost-cutting program in 2018.
Walgreens said customer traffic at Boots UK was down 85% in April, as people stayed at home during lockdowns imposed to control the pandemic.
That resulted in a hit of $700 million to $750 million to sales and weighed the most on Walgreens' Retail Pharmacy International unit.
Excluding items, Walgreens earned $0.83 per share in the quarter ended May 31, falling well-below consensus estimates of $1.17, according to Refinitiv IBES data.
For the year, the drugstore chain now sees earnings between $4.65 and $4.75, below estimates of $5.43.
The company upped its cost-savings target to over $2.0 billion by fiscal 2022, from previous target of over $1.8 billion.