Walgreens Boots Alliance is raising its cost-savings goal by 17% to $4.1 billion after a disappointing quarter — a move that comes just weeks after it said it was eliminating 10% of its corporate workforce.
The announcement Tuesday follows a weaker-than-expected quarter marked by less demand for COVID-19 tests and vaccines, a slow respiratory illness season, and consumers facing inflation and an uncertain economy. The Deerfield, Illinois-based company slashed its full-year adjusted earnings per share guidance Tuesday to $4 to $4.05 from $4.45 to $4.65.
“Our performance in the third quarter did not meet our overall expectations and we are disappointed to have to change our fiscal 2023 guidance,” CEO Roz Brewer said during an earnings call.
She said Walgreens administered 800,000 COVID-19 vaccines during the third quarter, down 83% from the third quarter of last year.
Consumers are also being more cautious in their spending, she said.
“Our customer is feeling the strain of higher inflation and interest rates, lower SNAP benefits and tax refunds and an uncertain economic outlook,” Brewer said. “They are pulling back on discretionary and seasonal spend.”
Additionally, Walgreens plans to close 150 stores in the U.S. and 300 in the United Kingdom, said James Kehoe, executive vice president and global chief financial officer for Walgreens Boots Alliance. The plan is to close those U.S. stores by fall 2024. Details were not immediately available about the locations of those stores.
Walgreens had an operating loss during the first nine months of this fiscal year of $6.4 billion, compared with an operating income of $2.2 billion during the same period last year. That was due, in part, to $6.8 billion, pre-tax, for opioid-related settlements and litigation. Walgreens has agreed to pay billions of dollars in settlements in a number of lawsuits over its alleged role in the opioid epidemic.
The earnings call Tuesday came about a month after Walgreens said it planned to eliminate 504 corporate jobs, with most of the cuts coming from Walgreens’ Deerfield and Chicago offices. Those reductions are saving the company about $100 million, Kehoe said.
Walgreens has been striving in recent years to transform into a health care destination, to compete with rivals CVS Health and Amazon. Walgreens has invested billions of dollars in Chicago-based VillageMD, which has primary care clinics next to Walgreens stores across the country.
Walgreens also completed its acquisition in March of CareCentrix, a company that coordinates home care for patients, including after they go home from the hospital. Earlier this year, VillageMD acquired Summit Health-CityMD, which provides primary, urgent and specialty care in New York, New Jersey, Connecticut, Pennsylvania and Central Oregon.
