Walgreens Reports $415 Million Loss On Higher Tab For Cost Management

Walgreens Boots Alliance Thursday reported a $415 million quarterly loss thanks to higher expenses from a major global “cost management program” and charges related to its United Kingdom operation.

The nation’s largest drugstore chain, which is amid a major expansion of healthcare services in the U.S. that includes rolling our new doctor-staffed clinics, is suffering declining sales in the U.S. and in the United Kingdom partly due to “lower demand for COVID-19 services.”

Demand for COVID related diagnostics and vaccines is still there, but not nearly at the levels earlier in the pandemic. Sales fell more than 5% to $32.4 billion from $34.3 billion in the year-ago quarter.

Walgreens swung to a $415 million loss in the company’s fiscal fourth quarter ended Aug. 31 compared to a $627 million profit in the year-ago quarter. On operating basis, the loss was even greater.

“Fourth quarter operating loss from continuing operations was $822 million compared to operating income of $910 million in the year-ago quarter,” the company said Thursday in its report on its fiscal fourth quarter and fiscal 2022 earnings. “Operating loss in the quarter reflects a $783 million non-cash impairment charge related to intangible assets in Boots UK, and higher costs related to the Transformational Cost Management Program.”

Walgreens almost four years ago announced the “transformational cost management program” amid global reimbursement pressures on prescriptions, particularly in the United Kingdom. The effort was designed to save more than $1 billion annually when it was first announced by then Walgreens chief executive Stefano Pessina and was escalated last year under CEO Roz Brewer.

The need to cut costs was also necessary as Walgreens increases spending on stores and new systems in the hotly competitive retail healthcare space that includes rivals CVS Health, Walmart and Amazon.

Looking ahead, Walgreens sees brighter days and raised its sales guidance for fiscal 2023. The company projects adjusted earnings per share of $4.45 to $4.65.

“Healthy core business growth of 8 to 10 percent in constant currency is expected to be more than offset by adverse currency movements of approximately 2 percent and by a headwind of 15 to 17 percent from lower COVID-19 vaccination volumes,” the company said Thursday in its earnings report. “Additionally, the Company is raising the U.S. Healthcare fiscal year 2025 sales target to $11 billion to $12 billion, from $9 billion to $10 billion previously.”