Walgreens Boots Alliance (WBA) is reportedly reaching out to potential purchasers to divest its UK-based Boots drugstore chain, marking its second endeavor to separate the unit, as per Bloomberg News on Monday. This move saw a surge in its shares by almost 5%. According to sources familiar with the matter, the company is collaborating with advisors to initiate initial talks with interested buyers for the unit, valued at approximately 7 billion pounds ($8.78 billion).
In 2022, WBA gave up early proposals to divest the unit. Nonetheless, it reopened talks regarding the separation of Boots, exploring options such as a potential initial public offering in London, as per a Bloomberg report from late last year.
Over the past year, WBA’s stock has dropped by 42% as the company grappled with challenges in revitalizing growth. This year, Walgreens reduced its dividend by 50% and revised its profit forecast downwards, attributing it to decreased consumer expenditure on non-essential products.
Boots stands as one of the UK and Ireland’s leading retailers, boasting significant revenue and an extensive network of stores. As of 2023, it operates 2,100 stores throughout the United Kingdom and Ireland, encompassing various formats from local pharmacies to sizable health and beauty outlets. Positioned predominantly in high street locations and shopping centers, Boots offers a wide range of health and beauty merchandise. Additionally, it offers optician and hearing care services both within its stores and through standalone practices.
In the second quarter of fiscal year 2024, WBA saw a 6.3% increase in sales compared to the same period last year, totaling $37.1 billion, marking a 5.7% rise on a constant currency basis. This growth was observed across all segments.
The second quarter recorded an operating loss of $13.2 billion, contrasting with an operating income of $197 million in the corresponding quarter last year. This loss was primarily due to a $12.4 billion non-cash impairment charge related to VillageMD goodwill, resulting in a $5.8 billion charge net of tax and non-controlling interest for WBA. Additionally, there was a $455 million non-cash impairment charge related to certain long-lived assets in the U.S. Retail Pharmacy segment. Adjusted operating income amounted to $900 million, reflecting a 26.5% decrease on a constant currency basis, attributed to lower sale-leaseback gains and weaker U.S. retail performance, partially offset by enhanced profitability in the U.S. Healthcare segment.
The net loss for the second quarter stood at $5.9 billion compared to net earnings of $703 million in the previous year’s quarter, primarily driven by non-cash impairment charges. Adjusted net earnings increased by 3.5% to $1.0 billion, up 3.0% on a constant currency basis, as the decline in adjusted operating income was compensated by a lower adjusted effective tax rate compared to the year-ago quarter, due to the recognition of deferred tax assets in foreign jurisdictions.
