Walgreens Boots Alliance Inc plans to cut about 4,000 jobs in the UK following a sharp drop in its business there and suspend stock buybacks, as the coronavirus pandemic jolts its business around the world.
Deerfield, Illinois-based Walgreens said that it anticipates full-year adjusted earnings between $4.65 to $4.75 a share, including $1.03 to $1.14 a share of costs related to Covid-19. Analysts surveyed by Bloomberg were expecting $5.43 a share. Walgreens had previously withdrawn its financial forecasts, citing the turmoil caused by the coronavirus.
Drugstores are grappling with both short-term disruptions and potential longer-term changes in consumer behavior driven by Covid-19. Before the pandemic set in, Walgreens was already facing questions about how it planned to compete with rivals focusing on health care and internet giants sizing up the pharmacy business.
Now, the playing field has changed once again, as the global spread of Covid-19 continues to alter both the health care and retail industries in unpredictable ways.
Foot traffic plummeted 85% in April at the company’s Boots stores in the UK amid strict lockdown orders, resulting in a $700 to $750mn hit to total sales that forced Walgreens to record a $2bn impairment charge. Overall, sales in the quarter, which ended May 31, were essentially flat compared with the same quarter a year earlier, at $34.6bn.
In the US, people rushed to stock up on prescriptions and toilet paper in the early days of the pandemic. Comparable sales at US drugstores rose 3%.
Walgreens said that a broad decline in visits to doctors’ offices and hospitals weighed on prescription volumes. Prescriptions filled at its US drugstores fell 1.3% compared with the year-ago quarter, though volumes have shown “steady improvement” since the end of May.
Costs associated with cleaning stores and boosting employee pay sent selling, general and administrative expenses soaring to $8.3bn in the quarter from $6.2bn in the year-ago quarter.
To help expand its health-care offerings, Walgreens said it plans to open as many as 700 doctors’ offices in its drugstores over the next five years. Rival CVS Health Corp has already made big steps in that direction by buying insurer Aetna and making over stores to focus on patient care.
Walgreens posted a loss of $1.71bn, or $1.95 a share, in the fiscal third quarter. On an adjusted basis, earnings per share came to 83 cents. Analysts surveyed by Bloomberg expected adjusted earnings of $1.19 a share.
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