By Daily Mail (U.S.) | Created at 2024-12-11 22:11:54 | Updated at 2024-12-22 18:41:05
1 week ago
Customers have begun to worry about Walgreens' future following rumors of a potential sale to a private equity firm.
Experts chimed in on Tuesday about the potential sale deal between Walgreens Boots Alliance (WBA) and Sycamore Partners and what it could mean for the stores.
Some of the biggest worries professionals have over the possible sale is an increase in store closures due to slow sales and reimbursement issues.
The drugstore chain has been struggling financially for several years, leading to the closure of over 1,200 stores nationwide by 2027.
'The focus isn't the neighborhood. It's not the community,' Christopher Crank, executive vice president of the Illinois Council of Health System Pharmacists, told CBS News.
He added that Walgreens customers could see the rate of store closures increase.
'My first reaction is that this situation is getting more dire,' Cornel Darden, chairman of the Greater Chicagoland Black Chamber of Commerce, told CBS News.
Walgreens declined to comment about the 'latest rumors or speculation' about the company to the DailyMail.com.
Experts are concerned over what could happen if Sycamore Partners equity group were to buy Walgreens Boots Alliance (WBA)
WBA previously announced it would close more than 1,200 Walgreens stores nationwide by 2027
Despite the lack of comment, the potential sales deal between WBA and Sycamore Partners could be completed in early 2025, according to the Wall Street Journal.
However, this possible deal was not the first time Walgreens has been targeted by a private equity firm in the last five years.
The KKR private equity firm approached the drugstore empire in 2019 with an offer to purchase the company for roughly $70 billion.
At the time of the offer, Walgreens had a $55 billion market value and more than $16 billion in debt.
Walgreens had already been in debt after spending more than $6 billion to buy nearly half of Alliance Boots in 2012 and completing the takeover in 2015.
As of August 2024, WBA is currently $32.85 billion in debt for the fiscal quarter ending in August 2024.
'I mean, what can we do? All the big companies do it. We're small fries. There is nothing we can do. They're going to do what they want to do,' customer David Baker told CBS News this week.
The KKR private equity group put in an offer to purchase Walgreens for roughly $70 billion in 2019
WBA suffered an 18.4 percent dip in shares between October and November of this year, but the company did surpass its quarter four earnings and revenues estimates.
Its fourth quarter sales increased by six percent year-over-year and its fiscal 2024 sales increased 6.2 percent.
'Our financial results in the fiscal fourth quarter and full year 2024 reflected our disciplined execution on cost management, working capital initiatives and capex reduction,' Tim Wentworth, CEO of WBA, said last October.
'In fiscal 2025, we are focusing on stabilizing the retail pharmacy by optimizing our footprint, controlling operating costs, improving cash flow, and continuing to address reimbursement models to support dispensing margins and preserve patient access for the future.'
WBA concluded US retail pharmacy sales' amount in this year's fourth quarter was $29.5 billion - a 6.5 percent increase from this time in 2023.
The company's stocks also surged 18 percent after the potential sale between them and Sycamore Partners was announced on December 10.
The company is now looking to make between $147 and $151 billion in sales next year, along with $1.6 to $1.80 billion in adjusted operating income.
The company plans to release its fiscal year 2025 first quarter earnings results on January 9.
Walgreens racked in $29.5 bullion in US retail pharmacy sales during this year's fourth quarter
Walgreens latest closure announcement came shortly after CVS Health wrapped up its three-year plan to close 900 stores.
The company hinted the 'significant' US store closures last June after cutting its profit forecast for the fiscal year 2024.
Walgreens has been in a tailspin for a long period of time. Profitability and sales are under pressure, especially on the retail side of the business,' retail expert Neil Saunders of Global Data explained to the DailyMail.com.
There has also been far too little investment in stores and the offer within the US. That's why some consumers have abandoned shopping at Walgreens stores and why the business is closing a lot of its outlets.
Saunders added that closing Walgreens locations may be necessary to 'protect pocket' but it will not solve 'underlying issues' or improve sales growth.
'If the private equity deal goes through, Sycamore Partners would acquire a sprawling business empire that they could, with some effort, fashion into a more disciplined operation,' Saunders told DailyMail.com.
'They would also have the possibility of selling off parts of the business, such as Boots, to maximize their return.'
Despite the sale only being potential, Saunders insisted the task of selling off the business 'should not be underestimated.'
'Walgreens is a big company with big problems, and this would be a longer-term investment rather than a way to make a quick buck,' he said.
'Cuts would most certainly be on the agenda, but the pathway to grow would be more challenging as the healthcare, pharmacy and retail sides of the business all have inherent problems that are not easily soluble.'
