Dive Brief:
- Walgreens plans to close 150 stores in the U.S. and 300 in the U.K., Walgreens Boots Alliance Chief Financial Officer James Kehoe said this week.
- The closures are part of a cost-cutting effort that just got its sixth target increase. The company projects at least $800 million in savings in 2024, for an accumulation of $4.1 billion by then, Kehoe told analysts.
- The retailer also just completed an organizational restructuring, which included the elimination of more than 500 roles, or about 10% of its corporate and U.S. support office workforce, Kehoe said.
Dive Insight:
The good news that COVID-19 has morphed into a more manageable public health challenge has been bad news for Walgreens’ sales and profits.
The drugstore retailer’s Q3 net earnings fell nearly 60% year over year to $118 million, and executives said they lowered their outlook due in part to uncertainty in consumer spending and diminished demand for COVID-related products and services.
“We had called out COVID as a wildcard heading into the quarter and have unfortunately seen less patient willingness to vaccinate,” CEO Roz Brewer told analysts, noting that Walgreens administered 800,000 COVID-19 vaccines in the quarter, down 83% year over year, with testing “also down sharply.”
But Walgreens in the U.S. is also failing to capture some discretionary spending because, like many of its peers, it doesn’t make enough of an effort, according to GlobalData Managing Director Neil Saunders.
“It plods along in an inert fashion, rather than proactively adapting to changing circumstances driven by an understanding of consumer needs,” Saunders said in emailed comments. “The net result is that consumers are diverting more of their dollars on beauty and other items to rivals.”
