Customers are starting to worry about the future of Walgreens after rumors of a possible sale to a private equity firm.
Experts spoke Tuesday about the potential sales deal between Walgreens Boots Alliance (WBA) and Sycamore Partners and what it could mean for the stores.
One of the biggest concerns professionals have about the potential sellout is an increase in store closures due to slow sales and refund issues.
The drugstore chain has been struggling with financial problems for several years, which has led to the closure of more than 1,200 stores across the country by 2027.
‘The focus is not on the neighborhood. It’s not the community’s fault,” said Christopher Crank, executive vice president of the Illinois Council of Health System Pharmacists CBS News.
He added that Walgreens customers could see an increase in store closures.
“My initial reaction is that this situation is becoming increasingly dire,” Cornel Darden, president of the Greater Chicagoland Black Chamber of Commerce, told CBS News.
Walgreens declined to comment on the “latest rumors or speculation” about the company to DailyMail.com.
Experts worry about what could happen if Sycamore Partners equity group buys 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 sale deal between WBA and Sycamore Partners could close in early 2025, the company said. Wall Street Journal.
However, this potential deal wasn’t the first time in the past five years that Walgreens has been targeted by a private equity firm.
Private equity firm KKR approached the drugstore empire in 2019 with an offer to buy the company for about $70 billion.
At the time of the offering, Walgreens had a market value of $55 billion and more than $16 billion in debt.
Walgreens was already in debt after spending more than $6 billion to buy nearly half of Alliance Boots in 2012 and closing the acquisition in 2015.
As of August 2024, the WBA currently has $32.85 billion in debt for the fiscal quarter ending August 2024.
‘I mean, what can we do? All the big companies do it. We are small fries. There’s nothing we can do. They’re going to do what they want to do,” customer David Baker told CBS News this week.
The private equity group KKR made an offer to buy Walgreens for about $70 billion in 2019
WBA experienced a share price decline of 18.4 percent between October and November of this year, but the company exceeded its profit and turnover expectations for the fourth quarter.
Fourth-quarter revenue rose six percent year-over-year and fiscal 2024 revenue rose 6.2 percent.
“Our fiscal fourth quarter and full year 2024 financial results reflected our disciplined execution of cost management, working capital initiatives and capital reduction,” WBA CEO Tim Wentworth said last October.
“In fiscal 2025, we are focused on stabilizing the retail pharmacy industry by optimizing our footprint, controlling operating costs, improving cash flow and continuing to address reimbursement models to support dispensing margins and improve patient access for the future.’
WBA found that U.S. pharmacy sales reached $29.5 billion in the fourth quarter of this year – an increase of 6.5 percent from 2023.
The company’s shares also rose 18 percent after the possible sale between them and Sycamore Partners was announced on December 10.
The company aims to generate between $147 billion and $151 billion in revenue next year, along with adjusted operating income of $1.6 billion to $1.80 billion.
The company plans to announce first-quarter fiscal 2025 earnings results on January 9.
Walgreens posted $29.5 in U.S. pharmacy sales during the fourth quarter of this year
Walgreen’s latest closure announcement came shortly after CVS Health completed its three-year plan to close 900 stores.
The company hinted at “significant” U.S. store closures last June after lowering its profit forecast for fiscal 2024.
Walgreens has been in a downward spiral for quite some time. Profitability and revenue are under pressure, especially on the retail side of the business,” retail expert Neil Saunders of Global Data explained to DailyMail.com.
There has also been far too little investment in stores and offerings in the US. That’s why some consumers have given up shopping at Walgreens stores and why the company is closing many of its stores.
Saunders added that closing Walgreens locations may be necessary to “protect the pocketbook,” but it won’t solve the “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, transform into a more disciplined business,” Saunders told DailyMail.com.
‘They would also have the option to sell off parts of the business, such as Boots, to maximize their returns.’
Despite the sale being only potential, Saunders stressed that the task of selling the company “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 certainly be on the agenda, but the path to growth would be more challenging as healthcare, pharmacy and retail all have inherent problems that are not easily solved.”