Walgreens to cut jobs, close clinics in cost savings move

  • Deerfield-based Walgreens said Monday it will try and cut $300 million from its annual costs as it expects growth to flatten in the 2020 fiscal year.

    Deerfield-based Walgreens said Monday it will try and cut $300 million from its annual costs as it expects growth to flatten in the 2020 fiscal year. Daily Herald file photo

 
 
Updated 10/28/2019 4:24 PM

Deerfield-based Walgreens announced it would close nearly 40% of the clinics in its stores and cut jobs in its corporate facilities, as the global pharmacy chain plans to trim an additional $300 million from its annual costs during the next two years.

The announcements came as parent company Walgreens Boots Alliance's earnings tumbled 55% in its fiscal fourth quarter on expenses tied to its current cost-cutting program. Walgreens raised its 2022 annual savings target to $1.8 billion, up from $1.5 billion. Adjusted earnings per share will be "roughly flat" in fiscal 2020, Walgreens said.

                                                                                                                                                                                                                       
 

Walgreens runs more than 18,750 stores internationally, but has been trimming its total as part of a plan to cut costs. The chain had been challenged by reimbursement cuts and lower price increases for branded drugs, as well as competition from online services such as Amazon.com.

A total of 150 Walgreens-run clinics will close by the end of the year, but the company will keep open more than 200 that are run in partnership with health care providers.

Drugstore chains have added small clinics that provide flu shots and minor health services, but analysts say the chains have struggled to make money off them as telemedicine services -- that allow customers to receive care through their smartphones -- have grown.

An unspecified number of staff positions will also be eliminated as the company modifies its "corporate support office structure to drive organizational efficiencies and reduce our cost base," a Walgreens spokesman said Monday. Employees will be eligible for severance and outplacement services. None of the job cuts will come from the store level, the spokesman added.

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U.S. drugstore sales, the biggest part of Walgreens' business, were up 2.1% to $26 billion from a year prior. The gains were driven by more prescriptions being filled at back-of-the-store pharmacies, a trend across the industry that's helped offset front-of-the-store retail pain.

Non-pharmacy retail sales of items such as shampoo, makeup and cigarettes were hurt by a plan to stop selling tobacco to customers under age 21, implemented Sept. 1, and led to a 1.2% drop in same-store retail sales. Rival chain CVS Health Corp. stopped selling tobacco products entirely in 2014, saying at the time that offering a cancer-causing product didn't fit with its focus on health.

The company has repeatedly expanded the cost-cutting plan, which originally targeted at least $1 billion in annual savings by 2022 and was expanded this spring to more than $1.5 billion. Savings will come from streamlining operations and digitizing some functions.

In August, the company said it will close 200 U.S. locations on top of a previously announced cut of as many as 750 stores.

Walgreens also announced Monday it will open 100 locations for the weight-loss company Jenny Craig at stores nationwide, starting in January.

Associated Press and Bloomberg News contributed to this report.

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