Walgreens To Lay Off 4,000 Workers, Close Stores As Retailer Addresses COVID-19 Impact

Walgreens (WBA) on Thursday reported it lost $1.7 billion in its fiscal third quarter and announced it would reorganize its store employee structure, reducing the headcount by 7% globally, with 20% coming out of the U.K.

The company said it looks to “swiftly address the impact of COVID-19” on its business.

Under what it has called the Boots Transformation Plan, Walgreens will close 48 Boots Opticians stores and cut more than 4,000 positions in its U.K. support office, about 7% of the company’s total workforce.

The cuts come as Walgreens looks to increase its cost-saving measures to more than $2 billion by fiscal 2022, up from the previous target of $1.8 billion. Walgreens said it saw an 85% reduction in footfall” in the U.K. in April as consumers were advised to stay home for the coronavirus pandemic.

The majority of Walgreens stores remained open during the COVID-19 crisis for pharmacy and essential healthcare purchases, but the retailer closed its fragrance and premium beauty counters in the U.K. More than 100 stores were closed in the region as well as nearly all of the company’s 600 optical stores.

Overall, Walgreens saw a drop in pharmacy volume due to a reduction in doctor visits and hospital admissions. The company also took on additional costs to keep its stores open during the pandemic through higher employee costs, social distancing measures and an expanded cleaning processes.

“Prior to the pandemic our financial performance for fiscal 2020 was on track with our expectations,” Stefano Pessina, executive vice chairman and CEO at Walgreens, said in a statement. “However, this unprecedented global crisis led to a loss in the quarter as stay-at-home orders affected all of our markets.

For the quarter, Walgreens saw a negative impact of about $700 million to $750 million due to the coronavirus, which it said primarily affected its Retail Pharmacy International division.

Walgreens reported a net loss for the quarter of $1.7 billion compared to a $1 billion increase for the same quarter a year earlier. The operating loss was $1.6 billion, and a $2 billion charge will be taken for the store closures and job cuts in the U.K.

Walgreens announced on Wednesday it was partnering with VillageMD in a $1 billion investment to offer medical clinics next to 500 to 700 of its U.S. stores in the next five years. More than 3,600 primary care providers will staff the clinics that will extend across 30 markets.

Shares of Walgreens were trading at $38.10 as of 11:30 a.m. ET, down $4.19 or 9.92%