Dive Brief:
- Walgreens Boots Alliance's Q1 sales surged by a whopping 10% year-over-year to a staggering $36.7 billion. The corporation slashed its quarterly dividend payment by nearly half.
- The U.S. retail sector struggled in this period, with retail sales dipping a substantial 6.1%. Comparable retail sales decreased by 5%. This downturn was influenced by a 90 basis point hit due to lower seasonal sales, a 160 basis point hit from a weaker cold and flu season, and a 60 basis point hit from Thanksgiving holiday store closures.
- A higher, unspecified level of shrink led to a hit on gross margins. Net loss narrowed to $278 million, compared to $3.8 billion a year ago.
Dive Insight:
U.S. Retail giant, Walgreens, reduces dividend in Q1, signifying struggle in retail sector.
Walgreens is banking on cost-saving measures and expansion of its healthcare services to spur its recovery, suggesting that improvements in customer experience at its U.S. stores may not be on the cards anytime soon.
Some analysts interpret CEO Rosalind Brewer's departure in September as a sign that retail might take a back seat in the company's turnaround. Brewer has been replaced by Tim Wentworth, who was the former CEO of Express Scripts, a pharmacy benefit manager acquired by health insurance giant Cigna in 2018. At Cigna, he also headed up Evernorth, the health services business.
The company began the new year after a series of upheavals. In June, Walgreens announced it would shut down 150 stores in the U.S. and 300 stores in the U.K., as part of a cost-cutting effort targeting at least $800 million in savings by 2024, resulting in a cumulative total of $4.1 billion by then. Soon after, CFO James Kehoe resigned. Neal Sample, who had previous experience at Express Scripts and Northwestern Mutual, replaced Hsiao Wang as chief information officer. Chief Marketing Officer Linh Peters left the drugstore retailer during a round of layoffs in November, adding to the 10% of the workforce that had been cut in May.
Walgreens' Q1 results successfully met expectations, "reflecting disciplined execution in a challenging retail environment," Wentworth stated in a press release.
"We're strategically reviewing every aspect of our business and pursuing all avenues to unlock value for our shareholders," Wentworth said, highlighting swift actions to reduce costs and boost cash flow. "We pride ourselves on being a trusted, independent healthcare partner, serving millions of customers while also helping payors, providers, and pharmaceutical companies achieve better health outcomes at a reasonable cost."
The performance of its U.S. stores pales in comparison to its Boots locations in the U.K., where retail sales increased by 9.8% year-over-year, in-store foot traffic rose by 7%, and its retail market share grew for the 11th consecutive quarter, led by beauty products, as per the company's earnings presentation.
- Leveraging cost-saving measures and expansion in healthcare services, Walgreens aims to recover from the challenging retail environment.
- In the U.S. retail sector, footfall decreased significantly, impacting Walgreens' business, as indicated by a 6.1% dip in retail sales and a 5% decline in comparable sales.
- Amidst a series of changes, Walgreens' new CEO Tim Wentworth, formerly of Express Scripts, aims to unlock value for shareholders, focusing on reducing costs and boosting cash flow.
- In the finance industry, Walgreens' Q1 results met expectations, demonstrating disciplined execution in a difficult retail environment, as asserted by CEO Tim Wentworth.
- The retail business sector has faced numerous challenges, with Walgreens' UK locations outperforming U.S. stores, showing a 9.8% rise in retail sales, a 7% increase in in-store foot traffic, and a growth in its retail market share.
- AI could play a crucial role in improving customer experience and driving sales growth in the retail industry, especially for companies like Walgreens looking to strengthen their businesses amidst tough market conditions.
