Dive Transient:
- Declines in Walgreens’ front-of-store retail gross sales continued in Q3, falling 5.3% yr over yr, due largely to retailer closures and decrease same-store gross sales. The pharmacy retailer final yr introduced it will shutter 1,200 U.S. shops over three years.
- Weak gross sales in grocery and family, well being and wellness, and wonder drove retailer comps down 2.4%. The worldwide and U.S. healthcare segments fared higher, serving to drive a 7.2% general Q3 gross sales enhance to $39 billion.
- The pharmacy retailer swung into the crimson with a internet lack of $175 million, a lower of $519 million in comparison with final yr’s $344 million in internet earnings.
Dive Perception:
Any sense of Walgreens’ prospects is getting cloudier because the retailer prepares to be acquired by personal fairness agency Sycamore Companions. The $10 billion deal — greater than double that after debt and future payouts are factored in — is anticipated to shut quickly. Because of this, the corporate has withdrawn its steerage and didn’t maintain a Q3 convention name.
“We stay targeted on our turnaround plan, which would require time, disciplined focus and a balanced method to handle future money wants with investments essential to navigate an evolving pharmacy and retail surroundings,” CEO Tim Wentworth stated in an announcement.
Its troubles aren’t fully outdoors its management, nevertheless. The corporate tussled in courtroom with the Division of Justice over allegations that it crammed hundreds of thousands of prescriptions for managed substances with out verifying their medical function or validity, settling for $350 million this spring. Related claims helped land rival Ceremony Support in chapter practically two years in the past. Ceremony Support, which Walgreens tried to accumulate a number of years in the past, is again in chapter courtroom eight months after exiting it. Ceremony Support blamed its retail retailer operations for its struggles, significantly its relationships with distributors, although analysts stated its debt load was a significant factor.
For the final 9 months, Walgreens lists $429 million in short-term debt and practically $7 billion in long-term debt, in line with its press launch Thursday. That’s more likely to rise, in line with S&P World Rankings analysts Matthew Todd and Declan Gargan. In March, following the announcement of the go-private deal, the analysts stated they’re monitoring Walgreens’ credit score profile, citing “destructive implications.”
“We expect Sycamore, just like different personal fairness sponsors, is incentivized to extend leverage to maximise fairness returns in a finite holding interval,” they stated.
