Walgreens Boots Alliance, the transatlantic pharmacy giant, is at a crossroads as it explores a potential sale and restructuring following years of financial struggles, the Financial Times reports.
A decade after Walgreens acquired the UK-based Alliance Boots in a major expansion move, the company is now considering breaking up its operations in an effort to stabilize its business and regain investor confidence.
The retail pharmacy industry has been facing significant challenges, including declining reimbursement rates for prescription drugs, growing competition from major retailers like Amazon and Walmart, and the rising costs associated with theft and security concerns. These broader industry struggles have contributed to Walgreens Boots Alliance’s financial difficulties, with its stock value falling nearly 90% from its peak.
Despite a temporary boost in revenue from COVID-19 testing and vaccinations, the company has struggled to maintain profitability. In 2023, it reported a nearly $9 billion net loss, leading to the suspension of its dividend and the announcement of hundreds of store closures in both the US and UK.
Beyond industry-wide challenges, Walgreens Boots Alliance has also faced setbacks due to a series of ambitious but ultimately problematic business decisions.
- Aggressive Expansion Under Stefano Pessina: As CEO from 2015 to 2021, Stefano Pessina oversaw the company’s expansion, acquiring thousands of new stores, including a partial acquisition of Rite Aid. However, as e-commerce disrupted retail sales, this strategy added significant costs without delivering the expected returns.
- Healthcare Investments Under Rosalind Brewer: In an effort to pivot toward healthcare services, former CEO Rosalind Brewer invested heavily in medical clinics, including a $5.2 billion purchase of VillageMD and an $8.9 billion acquisition of Summit Health-CityMD. However, the strategy did not generate enough patient traffic, leading to major financial losses and Brewer’s departure in 2023.
- Refocusing Under Tim Wentworth: The company’s current CEO, Tim Wentworth, has since shifted the focus back to retail pharmacy operations, emphasizing stabilization rather than expansion.
As Walgreens Boots Alliance struggles to regain its footing, it has entered discussions with private equity firm Sycamore Partners regarding a potential sale and restructuring. If a deal is reached, Sycamore may separate Walgreens’ businesses into distinct units with their own financial structures. However, concerns about Walgreens’ debt and declining profitability have raised doubts about whether a transaction will move forward.
While Walgreens’ US operations have been struggling, the company’s Boots chain in the UK has remained relatively strong. Boots stores have continued to perform well, with retail sales rising 8.1% year-over-year in the latest quarter, in contrast to a decline in Walgreens’ US sales.
Despite speculation about a potential sale of Boots, Stefano Pessina—now the company’s executive chairman and its largest shareholder—has signaled a commitment to keeping the brand as part of the broader company, at least for now.
