Walgreens closing stores
Walgreens closing stores, Walgreens Boots Alliance Inc. plans to close 200 Walgreens drugstores in the U.S., part of a further $500 million in cost cuts planned by the company that was formed by a trans-Atlantic merger at the end of last year.
The cuts include the store closures, a corporate reorganization and a streamlining of information technology by the end of 2017. They will fall heavily on the U.S. side of the business—indicating that the management team, largely made up of faces from European merger partner Alliance Boots, has found plenty to fix on this side of the Atlantic.
“Some parts are better than expected, while others have room for improvement,” Walgreens Boots acting Chief Executive Stefano Pessina on a fiscal second-quarter earnings call Thursday, its first as a combined company.
The deeper cost-cutting comes as some rivals such as Wal-Mart Stores Inc. are boosting spending on stores to make them more productive. Shoppers in recent years have shifted their trips away from big box discounters and toward more convenient chains such as dollar stores and pharmacies.
The changes also include cutting back on promotions at Walgreens stores that cut too deeply into profit margins. The fixes are needed as Walgreens deals with higher costs for generic medicines and reimbursement rates from drug plans that are chipping away at profit.
Overall, Walgreens posted a profit of $2.06 billion, up from $716 million a year earlier, as sales rose to $26.6 billion from $19.6 billion, largely because of the merger.
The company’s forecast for profit in the year that ends this August was largely short of what analysts had expected. Still, its shares were up about 2.6% Thursday morning.Walgreens Boots completed its merger late last year, bringing together the U.S. drugstore chain Walgreens with Alliance Boots, operator of the U.K. chain Boots and a vast drug distribution business. The merger was fraught with controversy, as activist investors and some inside the company strongly pushed to move the company overseas to cut its tax bill.
Ultimately, the companies decided to keep the headquarters in the U.S. Around the same time, the company surprised investors with a warning that drug inflation would hurt its results much worse than they had expected.
The company may not be done with making deals. Mr. Pessina, an Italian-born billionaire who had built up Alliance Boots through a series of acquisitions, strongly believes there are more opportunities in the rapidly changing U.S. health-care industry.
“The complex structure of delivering the medicine to patients will have to be rationalized,” Mr. Pessina said. “As a consequence, it’s easy to believe that we’ll have additional synergies coming from M&A activities.”
He added that Walgreens Boots wants to be “at the forefront of changes.”
The second-quarter report provided a snapshot of the health of the company, which posted sales growth the U.S. and internationally. Sales at U.S. pharmacies opened at least a year rose 6.9% from last year, helped by an active cold and flu season. Prescriptions filled increased 5%, while sales in the front of stores, which includes over-the-counter medicines, snacks and beauty products, rose 2.5%.
Overseas sales rose 2.9% at stores open at least a year.
Another key priority for the company is finding a permanent CEO after Greg Wasson retired following the completion of the merger. Mr. Pessina said a search committee is actively looking for the right candidate, though he said it’s been challenging to find someone who can lead the complex organization.
The cuts include the store closures, a corporate reorganization and a streamlining of information technology by the end of 2017. They will fall heavily on the U.S. side of the business—indicating that the management team, largely made up of faces from European merger partner Alliance Boots, has found plenty to fix on this side of the Atlantic.
“Some parts are better than expected, while others have room for improvement,” Walgreens Boots acting Chief Executive Stefano Pessina on a fiscal second-quarter earnings call Thursday, its first as a combined company.
The deeper cost-cutting comes as some rivals such as Wal-Mart Stores Inc. are boosting spending on stores to make them more productive. Shoppers in recent years have shifted their trips away from big box discounters and toward more convenient chains such as dollar stores and pharmacies.
The changes also include cutting back on promotions at Walgreens stores that cut too deeply into profit margins. The fixes are needed as Walgreens deals with higher costs for generic medicines and reimbursement rates from drug plans that are chipping away at profit.
Overall, Walgreens posted a profit of $2.06 billion, up from $716 million a year earlier, as sales rose to $26.6 billion from $19.6 billion, largely because of the merger.
The company’s forecast for profit in the year that ends this August was largely short of what analysts had expected. Still, its shares were up about 2.6% Thursday morning.Walgreens Boots completed its merger late last year, bringing together the U.S. drugstore chain Walgreens with Alliance Boots, operator of the U.K. chain Boots and a vast drug distribution business. The merger was fraught with controversy, as activist investors and some inside the company strongly pushed to move the company overseas to cut its tax bill.
Ultimately, the companies decided to keep the headquarters in the U.S. Around the same time, the company surprised investors with a warning that drug inflation would hurt its results much worse than they had expected.
The company may not be done with making deals. Mr. Pessina, an Italian-born billionaire who had built up Alliance Boots through a series of acquisitions, strongly believes there are more opportunities in the rapidly changing U.S. health-care industry.
“The complex structure of delivering the medicine to patients will have to be rationalized,” Mr. Pessina said. “As a consequence, it’s easy to believe that we’ll have additional synergies coming from M&A activities.”
He added that Walgreens Boots wants to be “at the forefront of changes.”
The second-quarter report provided a snapshot of the health of the company, which posted sales growth the U.S. and internationally. Sales at U.S. pharmacies opened at least a year rose 6.9% from last year, helped by an active cold and flu season. Prescriptions filled increased 5%, while sales in the front of stores, which includes over-the-counter medicines, snacks and beauty products, rose 2.5%.
Overseas sales rose 2.9% at stores open at least a year.
Another key priority for the company is finding a permanent CEO after Greg Wasson retired following the completion of the merger. Mr. Pessina said a search committee is actively looking for the right candidate, though he said it’s been challenging to find someone who can lead the complex organization.
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Walgreens closing stores
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